Coal trade issue of China and Australia hurting Mongolia’s environment
Last year China turned its back on Australian coal; in October, customs officials in China began rejecting shipments of coking coal from Australia. Beijing claimed the turnbacks were due to “environmental quality” concerns, but the act was largely viewed within the context of the ongoing diplomatic spat between the countries.
It proved to be bad news for both economies. Overnight, Australian coal operators lost access to one of their most lucrative export markets, worth $10.4 billion the previous year. In the months that followed, soaring electricity prices left much of China’s southeast without heating or electricity.
While the decision hurt both Australia and China, many third parties benefited, as they stepped in to plug China’s coal shortfall. Countries as far afield as Colombia and South Africa scrambled to send coal to the mainland; more established partners, including Indonesia, Russia, Canada, and the United States, also upped existing shipments dramatically. But with China’s northern steelmaking hubs crying out for coking coal, Beijing couldn’t afford to wait a month or more for shipments to round the Indian Ocean — and so, it turned to Mongolia as a band-aid solution to short-term demand.
For reasons that remain unclear, this “band-aid solution” has continued well into 2021. In March, Mongolian coal exports to China were up by 4,270.5% compared to the previous year. It’s a volte-face from 2019, when Mongolian government policy was squarely aimed at breaking the country’s addiction to coal. With as many as 1,000 trucks heading for China on a daily basis, it seems the Mongolian administration is now committed to the opposite.
Since China began freezing out Australian supplies, the coal business has boomed. The Mongolia Energy Corporation recently announced last month that it has doubled its profits year-on-year, and the Mongolian Mining Corporation similarly announced it doubled its coal export volume across the second half of 2020. Investor confidence was so high that even an Australian-owned venture stood to reap the rewards — Aspire Mining Ltd, which mines entirely within Mongolia, shot up twofold on the Australian Stock Exchange (ASX).
Few in Mongolia, though, are celebrating this development. The nation’s capital, Ulaanbaatar, consistently ranks atop lists of the world’s most polluted cities, and since last October, coal mines perched on the city’s fringes have been kicking up much more chemical and dust pollution than usual.
“To give you an idea of the scale of the issue,” says Ankhbayar Ganbold, country director (Mongolia) at the Nature Conservancy, “Baganuur Coal Mine, which sits within the city limits, produced 4,600 tons of CO2 in December 2019. Across the same month last year, it churned out as much as 18,400 tonnes.”
“The other coal mine within Ulaanbaatar’s nine düüregs, or districts, is Nalaikh — which, at least officially, ceased operations in the 1990s. Since early December, it’s been up and running again. In fact, it’s now the primary local contributor of CO2 emissions and particulate matter (PM) 2.5.”
In the summertime, air quality in Ulaanbaatar often hovers around levels deemed safe, per WHO guidelines. But in the winter, when temperatures regularly drop below minus-40°C, it averages a pollution level 27 times worse than the safety benchmark. Little wonder then that, in October, air quality in Ulaanbaatar again ranked as the worst in the world.
The competition for the list, in 2020, wasn’t all that stiff — lockdowns and reduced transport activity due to COVID-19 saw skies clear over some of the world’s most polluted cities. But “this just hasn’t been the case for Ulaanbaatar,” says Dmitri Sokov, head of international development at the Mongolia Nature and Environment Consortium. “In fact, thanks to the increase in coal exports, it’s been an atypically poor year in terms of air quality — PM 2.5 levels were up 132% across the winter period.”
Much like Beijing, Ulaanbaatar sits at the bottom of a valley, which traps smog beneath a blanket of warm air. And there’s plenty of smog around to get trapped, since residents of the city’s “ger” districts, who live in yurt tents without access to electricity, have traditionally had to burn sacks of cheap coal in order to cook and stay warm. On average, a ger household burns three tons of raw coal per year.
Hugalu Altan, a textile worker who lives in the western Tolgoit district, recently told SupChina that the past winter was noticeably worse than those in previous years. “It’s horrible living here, particularly this year,” he said. “On cold mornings, I watch the gray smoke roll out toward the hills. That’s why many of the young people like to move away…but this year, they’re stuck.”
Local politicians have been promising for years to fix the issue. They claim that a ban on raw coal — and subsidy on refined coal briquettes — saw a 60% reduction in pollution in 2019. But those gains haven’t carried over to 2021, according to Hugalu. “No one could afford to buy even the cheap [illegal] coal this year,” he said, amid city-wide lockdowns. “So instead they burnt trash.”
In a sense, he’s luckier than others. Living and working on the city’s western fringes, Hugalu is tucked far away from the coal-fired electric plants which ring the east. Many of these, says Sokov, have also benefited from excess coal destined for China. “It’s been a dramatic increase, so it’s natural that there is going to be some degree of internal transfer. I think this is, in part, why we are seeing levels of pollution this year that don’t quite tally with the picture from the last two.”
“It’s a three-pronged problem,” he says, “but the government focuses only on restricting domestic usage, while letting industry run rampant.”
Revaluation of Romania’s enormous mineral wealth
At the level of the National Agency for Mineral Resources (NAMR) a quantitative, qualitative and value revaluation action is in full swing, for over 700 deposits of solid minerals, then following to move to mineral waters and oil reserves. However, it is difficult to quantify the value of these deposits in money, but for specialists the value of a deposit is given by its size and quality. Within this action, carried out by NAMR, about 60 deposits of ore, coal, building materials etc. have been revalued and tens of government decisions have been drawn up aiming at the registration of the real reserves at the current level of detail and knowledge. The new values of reserves are registered in the inventory of assets in the public domain of the state, in conditions in which there are deposits whose reserves have never been valued, having only an initial homologation thereof.
Romania is country rich in mineral resources, but the reality is that we no longer know how much this wealth hidden in thousands of deposits is worth. The last quantitative revaluation was made 15 years ago. Since then, the increasing demand for raw material has led to a massive exploitation of mineral resources, and new deposits have been discovered in parallel.
The first database, in 1925
In 1925, Romania made its first database on deposits. After more than 40 years, in 1968, geological data was introduced for the first time in a computer purchased from the U.S. Subsequently, in 1971, another computer was purchased, also from the U.S., for data storage. During 1997-1999, NAMR had made one of the most performing databases in the oil industry. Today, all data stored at the time with great effort is lost. Now, it must be re-uploaded.
Gold is no longer exploited
Gold and silver ore reserves are estimated at 760 tons, according to data available. But in Romania gold hasn’t been exploited since 2007, after all exploitations had been closed because they were no longer profitable due to outdated technologies and high production costs. In the years to follow, technologies have improved, new ones have emerged, but Romania no longer opened the gold mines. In a top of the largest untapped 50 gold mines and deposits in the world, published in 2012 by Natural Resources Holdings, the deposit in Rosia Montana ranked 17, being valued at 18.5 million ounces of gold. Another deposit, the one in Rovina, was estimated at 6.96 million ounces of gold and ranked 47 in the top. Now, the only gold exploited is the one that appears in association with polymetallic ores.
Non-ferrous processing industry, destroyed
Copper deposits are estimated at around 2 billion tons, and the state-owned company Cupru Min holds the rights of exploitation for the largest deposit in Romania, the one in Rosia Poieni, where 60% of the country’s reserves are located. Although Romania is the European country with the largest copper reserves, the manufacturing industry is missing. It existed, but was destroyed after 1990, and now the copper ore concentrate is exported and processed products are imported. In 1990 there were 3 plants where processing was made, but one by one they have all been destroyed by failed privatizations. While Sometra Copsa Mica, Apelum Zlatna and Phoenix Baia Mare (formerly Cuprom) became history, our neighbours, Bulgaria and Serbia, have developed over the past few years a strong non-ferrous metals manufacturing industry.
90 million tons of polymetallic ores
Another important resource is represented by polymetallic ores. According to the Economic Encyclopedia of Mineral Resources, there are 90 million tons of polymetallic ores in Romania. One ton of polymetallic ore contains 10 grams of molybdenum, 30 grams of nickel and cobalt, 50 grams of chromium, 300 grams of gallium, 1,000 grams of titanium, 2,500 grams of vanadium and 5,000 grams of grams of arsenic.
Yellow hydrogen can save coal
Romania’s coal reserves are large, but the new environmental policy of the European Union, known as the Green Deal, requires the abandonment of polluting technologies. The current data shows that Romania has hard coal reserves of about two billion tons, of which 600 million tons are in exploited perimeters. Also, Romania’s lignite resources are estimated at 690 million tons, of which exploitable in leased perimeters, 290 million tons. This vital resource for the Romanian energy system will have to be replaced with less polluting sources, but coal might not be removed completely, already having technologies that can transform it into syngas, synthetic diesel and hydrogen (yellow H2 – coming from fossil fuels). Hydrogen, as an energy alternative, hasn’t been only a topic of discussion in Europe for a long time. There are already many plants that produce green hydrogen (coming from biomass) and Germany has recently allocated EUR 9bn to develop the hydrogen industry. Romania is still contemplating the idea.
According to BP evaluations, Romania has proven oil reserves of around 100 million tons and gas reserves of 100 billion cubic meters, excluding the offshore area. NAMR has not evaluated the mineral resources of the country, highlighted in the inventory of assets in the public domain of the state, managed by the authority, so assets in the nature of petroleum resources were recorded on December 31, 2015 with a ‘zero’ inventory value, according to a report of the Court of Auditors issued last year.
We have rare metals, but we don’t exploit them
Romania is one of the few countries in Europe that holds rare metal resources. For example, before 1989, Romania was the sixth country in the world, after the U.S., USSR, China, Japan and France, to produce zirconium, from which the capsules in which the nuclear fuel for the Cernavoda plant is stored are manufactured. Titanium, which was used in the aerospace industry, was also mined. Another metal was vanadium, which is now included by the European Commission in the list of 30 critical raw materials for the EU. Vanadium is used to make special steels, and vanadium alloys are used in nuclear reactors, due to the poor interactivity of the element. Another ore passed on the U.S. list. is graphite, the raw material from which graphene is produced, a material up to 200 times stronger than steel and 1,000 times lighter than a sheet of paper. It is the best conductor of electricity, and the energy industry uses it more and more. The only graphite mine in Romania, located in Gorj County, produced about 40,000 tons per year in the 1990s, but is now closed. A lesser known element is tellurium, which in Europe is found only in Romania and Sweden, and globally China, USA, Canada and Australia still have reserves. It is a rare metal used in the manufacture of atomic bomb casings, in the aerospace and energy industries, but in Romania it is no longer extracted.
List of critical materials, extended to 30
The European Union’s reliance on imports of raw materials threatens key industries and exposes it to blockades by China and other resource-rich states, shows a report by the European Commission, according to international media. Thus, the lack of raw materials used to produce batteries and equipment used in the field of renewable energy could also jeopardize the objective of the EU to achieve climate neutrality by 2050. The European Union estimates that in order to reach the climate neutrality target, the EU bloc would need 18 times more lithium and five times more cobalt by 2030. Forecasts for 2050 show that the EU will need 60 times more lithium and 15 times more cobalt, according to international media. Under these conditions, the list of critical raw materials for the EU was expanded to 30 materials, from 27, with four metals being added, while helium gas was removed.
Coal sector will have decrease in production this year in EU
The COVID-19 pandemic and its economic consequences has already resulted in a significant decline of coal demand in the EU, forcing many leading local producers to cut their production and reduce wages to personnel by 20-25%. In addition, some of them have already called on their national governments as well as the European Commission – the EU’s executive body – to provide needed support this year, with the aim of avoiding massive lay-offs of workers and the prevention of possible social unrest.
The volume of coal mining in the European Union and the United Kingdom may significantly decline this year, due to the ever tightening environmental regulations in Europe and the ever growing pressure from renewables, according to recent statements made by some leading EU coal mining companies and local mining analysts. This situation reflects the trend of some leading Western European economies rejecting coal and shifting to cleaner energy sources.
An example of this trend is the UK, whose government recently announced plans to close at least seven large coal-fired power plants during the period 2022-2023. In the meantime, according to some EU media reports, the UK is not the only European country which is considering a significant cut in coal usage in the near future, notably Italy.
Perhaps the most complex situation is currently observed in Poland, a country which has been historically considered as one of the centres of coal production in Europe and which its coal sector employs more than 80,000 people. According to a recent Reuters report, due to the current complex environment, PGG, Poland’s largest coal producer, is considering conducting restructuring its business that may result in the closure of its Ruda and Wujek coal mines. Currently, there are only 12 large-scale coal mines in Poland, which is almost two to three times lower than in the 1980s when the country accounted for 19% in the global coal production. At that time the annual volume of exports of Polish coal were estimated at 40-45 million tonnes, with the annual output of more than 200 million tonnes.
In general, the European coal industry went through several serious crises during the 20th century, each of which resulted in restructuring and the reduction of output and the terminating of workers employed in the sector. Those crises have also led to the almost complete suspension of coal mining a number of European countries that were previously considered as centres of coal production in Europe – for example, the Dutch region of Limburg.
Still, despite this, active coal mining is currently ongoing in 41 regions of 12 countries of the EU (including ten regions in the United Kingdom). However, the possible closure of local coal-fired power plants – their main customers – will put to an end to the coal industry in these regions. In addition to Poland, the list of major coal-producing nations in Europe is currently comprised of Czech Republic, Germany, the UK and Spain to a lesser extent.
In the majority of these nations, the volume of coal production has significantly declined in recent years, which was also due to the current policy implemented by the European Commission that involved the provision of huge financial compensation to European governments and their major coal producers to convince them to close their coal mines.
Prior to the 2010s, the coal mining sector of many EU states received subsidies in both directly and indirectly from their national governments. An example is Spain, where coal mining has been directly and indirectly subsidized by the state in recent decades. Most subsidies are allocated in the form of direct payments to coal-fired power plants for the maintenance of capacity, as well as the provision of obligations to purchase a minimum share of coal from Spanish mines.
Such practices have repeatedly criticized by the European Commission and have become the subject of numerous litigations. In 2016, Spain received the approval of the EU state subsidy program for its remaining 26 coal mines in the Castile and Leon regions, as well as Asturias and Aragon in the amount of 2.13 billion euros.
The condition of this program was closure of mines by the end of 2018. Otherwise, companies must return the subsidies received. As a result, as of early 2020, there was only one small Escondida mine left in Spain in the region of Castile and Leon, the owner of which had entered into an open confrontation with the government. Over the next ten years, the Spanish government with the financial support of the European Commission will invest more than 250 million euros in the rehabilitation of coal regions. The dismissed mine workers will be given the opportunity to retire early, as well as other social benefits and retraining programs. Practically, the same processes are currently seen in coal sectors of other major EU major nations.
For example, several months ago the last coal mine was closed in the Ruhr area in Germany and the Italian island of Sardinia. The current EU coal mining policy also resulted in the closure of the only mine in Slovenia, three coal mines in Romania, and the Paskov mine in the Moravian-Silesian Region in the Czech Republic, where only two mines currently remain in operation.
Coalmine Pljevlja in Montenegro recorded higher net profit in 2019
Pljevlja coalmine’s operating income reached 47.17 million euros at the end of December 2019, which is by 9.1 % more than in in 2018, according to the financial report. The coalmine recorded a net profit in the amount of 9.56 million euros in 2019, which is 43.5 % higher compared to 6.65 million euros profit in the previous year.
At the same time, operating expenses rose by 3.8 %, reaching 35.88 million euros. Salaries, benefits and other personnel expenses reached 14.14 million euros, costs of materials amounted to 9.82 million euros, depreciation and provisions reached 7.57 million euros, while other expenses reached 4.24 million euros. Total assets of Pljevlja coalmine at the end of December 2019 were worth 79.86 million euros, which is 6.7 % more than a year before. The company’s long-term provisions and liabilities amounted to 16.49 million euros, short-term to 12.73 million euros, while deferred tax liabilities reached 1.19 million euros. Retained earnings stand at 13.93 million euros. In April 2018, power utility EPCG announced that it has launched a buyout bid for the entire capital (5,064,443 shares) of Pljevlja coalmine. The bid was valid in the period between 20 April and 4 May and EPCG offered to pay 6.4 euros/share of the coalmine. According to the analysis performed by Deloitte, which said that although the price of Pljevlja coalmine shares stood at 6.9 euros at the end of 2017, the fair price is 6.4 euros/share. According to the decision of the Commission for the Capital Market in early June, EPCG became the majority owner of Pljevlja coalmine.
Polish and Czech dispute over Polish lignite mine and power plant
Poland has some of the worst air quality in the European Union, so it is no wonder why Poland’s planned expansion of its Turów lignite mine on the Czech border is straining bilateral ties and raising questions about compliance with European Union regulations.
Turów’s licence expires in April and Polish state-owned utility PGE hopes extraction will continue until 2044 and expand to within 100 metres of the Czech Republic’s border and close to German territory.
In Bogatynia, the Polish town closest to the mine, PGE is the largest employer.
PGE’s 1.3-gigawatt power belches pollution across the border and a new 450-megawatt plant is due to begin operations this year. The site supplies approximately 8 per cent of Polish electricity.
Environmentally ruinous coal currently makes up about 80 per cent of Poland’s energy generation – the highest coal dependency in the EU – and it is only expected to fall to 50 per cent by 2040. According to the European statistics agency, Eurostat, renewables made up 10.9 per cent of Poland’s energy mix in 2017, which will need to increase to 15 per cent this year to comply with the EU’s environmental targets.
It has been estimated in a European Commission report that around four-fifths of Polish coal mines are unprofitable.
The populist Law and Justice Party administration has maintained support for the coal sector and provides government subsidies to preserve the industry.
Rising carbon emission costs and volatility in the energy market, however, have made that commitment less popular among voters.
The municipal government in Liberec on the Czech side of the border said the brown-coal, opencast mine and plant endangered the water supply for 30,000 Czechs. It has filed a complaint in Brussels that says the site contravenes EU trans-boundary environmental rules and that PGE has failed to consider Czech interests.
“The water crisis caused by decades of Turów mining activity is already happening. The prolongation of mining can make it significantly worse,” said Martin Puta, the Liberec governor. PGE was playing “roulette with our water resources”, he added.
PGE said it monitored groundwater and water in the Czech border town of Uhelná “may be impacted”. The firm added that it was working on a subterranean cut-off wall to “limit the impact of the opencast mine on this water intake”.
Residents in the German border town of Zittau also say PGE has failed to address cross-border pollution and noise from the mine and power station.
“In our opinion, this environmental impact assessment wasn’t made to fulfil laws, it was just made up,” Zittau’s mayor Thomas Zenker told the media.
“We try to be honest, but not too harsh. Because the problems on our side are not comparable to the Czech side. So we try to support the Czech side without taking away from the Polish side every chance for development,” the mayor added.
How valuable is Kosovo’s mineral wealth?
One of the present myths in the public is that NATO countries have supported the war in Kosovo in order to own the inexhaustible Kosovo mineral resources. This is based on the view that if the state recognizes Kosovo’s independence, the state of Serbia would lose enormous money that would be obtained by exploiting ores.
How valuable is Kosovo’s mineral wealth?
We have no idea. A google search, except for obscure nationalist sites that mostly repeat similar figures and not citing sources, does not provide information on Kosovo’s mineral resources. (A good example is a Facebook reporter who, as one of the arguments in favor of the claim that Germans buy vineyards in Metohija, enclose that they are mentioned in Roman records as wines from Dardania as higher quality than wines from Gaul).
Also, there is no information on the website of the Ministry of Mining and Energy and the Geological Survey of Serbia. But one can find the Mineral Deposits of Serbia Ministry of Mines study on the Internet.
If we accept these claims fully, then we are facing a mineral wealth of perhaps as much as $ 1,500 billion. To put this figure in perspective, it is more than the GDP of Spain and Russia, and roughly the GDP of Canada. So we should certainly take this projection not with the pinch, but with a ton of salt.
This sum is doubtful because when you look at the figures, something is missing. It is stated that there are 2.5 million tonnes of nickel in Kosovo; 4.5 million tonnes of magnesite; 400 thousand tons of zinc, lead and bauxite each. If we multiplied this amount of ore by the value of these metals on the stock market, we would get a total sum of only 28 billion, which is far, very far from the initial 1,500.
Mining sources in Kosovo agree that coal deposits are the most important and that there are about 15 billion tonnes of lignite coal in Kosovo. Lignite is a type of coal with the lowest energy value, except peat (it receives less energy from its combustion than other types), and since transport costs are high, lignite is not traded at all, but is most commonly used to produce electricity near the site of exploitation.
This is why EPS built its power plants Nikola Tesla and Kostolac near coal mines.
This makes it a little more difficult to estimate the value of coal. In 2008, the Economist newspaper (domestic, not foreign) estimated the value of this lignite at $ 85 billion. However, in an era of decarbonisation, where there is increasing insistence on producing electricity from renewable sources and reducing greenhouse gas emissions, the question is how much of this coal will actually be exploited.
There are coal mines in Western Europe that have not been exploited for decades, although there are technical possibilities. Considering that it takes time to bring these coal deposits to use, as well as the relatively small capacity to consume electricity in Kosovo (and it is almost impossible to store it), it is likely that this coal will never actually be exploited, except in a small measures for the needs of the local energy market.
Revenue is not the same as profit, so the price of the ore is not the same as its value
The value of these mineral resources is calculated in inscriptions by multiplying the amount of ore by the value of tons of metal on the stock market. But it is only income, not profit. It occurs when expenses are deducted from income.
RTB Bor produces a large amount of ore (mainly copper, but also silver and gold), but it was until recently a loser who lived off subsidies (both capital for investments in a new smelter and indirect ones for regular business by not paying taxes and suppliers from the ranks of state-owned enterprises, eg electricity).
So, the fact that the ore is in the soil does not guarantee that it will bring us some positive value, otherwise we would all benefit from RTB Bor instead of it being our humpback for years.
Almost everywhere in the world, the largest mines are not state-owned but private: the ore itself is owned by the state, which gives mining companies a concession for the exploration and exploitation of the ore for a fixed period. Mining companies pay the state rent for this privilege.
In Serbia, mine rent is 7% of mine revenue (except for the privileged NIS, due to an international agreement with Russia, it is 3% for them). So, in this most favorable case, these initial unrealistic $ 1,500 billion is actually the same unrealistic $ 105 billion, and these more conservative $ 28 billion becomes actually $ 2 billion.
The ore lying in the ground is worth nothing
One of the main arguments against the aforementioned views lies in the fact that nobody exploits these ores for almost 20 years after the war. Only small lignite mines for the Obilic, Kosovo and Trepca thermal power plants are functional from the mines.
Of course, there is the Trepca mine, which is active, but on a much smaller scale than it was at the time of the SFRY. If this was the goal of military intervention in Kosovo, I guess the first thing the international administration would do was split concessions and start digging.
Whatever the political status of Kosovo, the protection of civilizational assets such as the private property of its citizens in the territory of Kosovo (land, buildings and other movable and immovable property) should be of Serbia’s greatest interest.
Discourse on Kosovo’s mineral resources and how it should be protected should not be a primary topic.
Serbia: A neoliberal blast on mining
The results of the operation of modern mineral raw materials business arrangements are visible, and the good will not come by itself, it should be summoned. So let’s get rid of the misconceptions and pull the manual until we became just a hired labour force on our land with our mineral resources.
In liberated Serbia, Majdanpek was the first mine to start production in 1847. Significant funds were invested and high hopes were laid, the idea was to create the basis for the industrialization of Serbia by the production of iron and copper in Majdanpek. No goal was achieved in a decade of work, the attempt was unsuccessful. The same happened to the Kucajn, Avala and Kosmaj mines. Following these experiences, a decision was made to issue concessions and invest in private geological exploration and ore mining.
Coal as an energy source becomes significant with the invention of the steam engine, and by the end of the first half of the 19th century, the first coal mines were opened in Serbia – Miliva, Vrdnik, Misača and the particularly important Senj mine, the state mine to date, for the supply of coal to Topolivnica in Kragujevac, and later for the supply of the railway with the construction of the Belgrade – Nis railway. In addition to the railway and Topolivnica, the gradual increase in interest in coal in Serbia is influenced by the construction of the first industrial steam-powered plants (mills, sawmills, breweries, etc.), and especially the emergence of steam ships on the Danube.
In the middle of the second half of the 19th century, coal mining began in Kostolac, and was used to supply ships on the Danube, in brick factories and was exported to Vojvodina and Romania. With the growth of coal demand, new mines are being opened: Vrška Čuka coal mine – Avramica, Aleksinac and others. At the end of the 19th century there was the discovery of a rich “red gold” mine in Bor, the opening of an antimony mine and other non-ferrous and precious metal ores and raw materials for cement production.
The arrival of young educated professionals in the country in the second half of the 19th century, though not sufficiently numerous, had a striking effect on the opening and development of mines, on planning and directing mineral exploration, on establishing geoengineering standards in the construction of structures (railways, roads, bridges, etc.). ), to modernize mining legal and normative regulations, to modernize and establish a functional organization of the state administration for mining, and especially important – to lay the foundations of school and scientific development of mining, geological and Serbian engineering, to form a Serbian knowledgeable society from which the Serbian royal academy originated.
To summarize the development of Serbian mining in the 19th century, it ranged between the initial setbacks and the efforts of the state to revive and initiate mining and significant results in the last decades.
At the beginning and during the first half of the 20th century, the started trends continued. Serbia with a modest economy has shown no desire to adequately evaluate its mineral resources. There was an interest only in the exploitation of ores of gold, silver, copper, lead, zinc and antimony. All major mines were in the hands of foreign capital, whose basic business principles were contained in an effort to maximize the benefits with investments. In these circumstances, mining functioned during the first half of the 20th century.
A strategic support
After the Second World War, the mines were nationalized in a demolished and ravaged country. In such an environment, great investment and professional efforts were being made to revitalize and revive mining. The shortage of experts was quite visible, aware of that fact, the state was responding and deliberately moving to the opening of educational and scientific institutions with the task of providing engineering and scientific support to development.
Mining was a strategic pillar of the economic and general progress of Yugoslavia and Serbia, as a republic with the strongest mineral economy, on which the development of the extraction industry, namely energy, metallurgy, mechanical engineering, building materials industry, electronic and electrical industry, agriculture, water management, was based. chemical, pharmaceutical, etc. Mining had a very important function in addressing demographic and social issues as well as regional development issues, then a very significant position in the country’s foreign trade balance and potential to reduce the sensitivity and dependence of the national economy on geopolitical and other external influences.
In the second half of the 20th century, the Serbian mineral resource complex made a huge contribution to the whole national being, direct and indirect effects were over $ 200 billion in profits and an immeasurable contribution to the independence and sovereignty of the country. Even in the years of great decline at the end of the millennium, mining with agriculture was the most reliable economic pillar of the country. During the economic and political sanctions and isolation of Serbia, the country survived thanks to agriculture – food production and mining, above all the exploitation of energy mineral resources.
All mining contributions are not quantifiable or metric, and they relate primarily to road, rail, housing and water infrastructure construction, industry incentives, investments in health, education, culture, science, research, publishing, sports, tourism, to extremely significant support for archaeology. In the second half of the 20th century, Serbian mining went through three development stages.
After the liberation in the devastated country, strategic priority was given to the mineral resource complex as a basic industry branch, and in very scarce financial, technical, technological and personnel conditions, the reconstruction of existing mines and the opening of new mines began. Well-designed and guided activities, supported by enthusiasm, renunciation and percussion, have produced results and initiated the exploitation of mineral resources, which is entering a new development phase in the 1950s. Advanced and safe exploitation technologies with a focus on surface exploitation are introduced, highly mechanized production is multiplying, production results and technological results were achieved that place our mining at the top of the most developed mining economies in the world.
Progress continued until the last decade of the 20th century, when the break of Yugoslavia, sanctions and economic isolation, the destruction of the country by NATO bombing, transition and privatization that ravaged the country and destroyed its economy. Consequences of this did not bypass mining, there was a decline and disappearance of progressive power, a fall in production or a complete shutdown of the mine, a technological and technological backlog and collapse, and the suspension of investment in geological exploration (reminder- in the period 1980-1990. more than $ 15 million invested was, as much as $ 18.5 million in one year).
A devastated economy
There have been job losses, a large drop in salaries and staff outflows, especially by experienced highly educated professionals. Social turbulence and political turmoil further complicate relations and adversely affect personnel topology in state-owned mines. Human resources were positioned according to the criterion of political eligibility rather than proven expertise, due to ignorance and lack of expertise, mistakes are made, omissions and great harm were done.
This situation also affects the situation in research and education. Devastated mining industry, in its struggle to survive, loses its absorption power and interest in implementing scientific and technical innovations, which causes a drop in turnover in the market for engineering and creative services, and is evident in reducing the need for scientific, applied and innovative research services. This is reflected in the decline in personal income, the outflow of people from the faculties, institutes and the emergence of interest groups, autistic incarceration to avoid public and professional criticism, the emergence of unfair competition and tendering, the collapse of criteria and the erosion of the level of scientific and professional evaluation. The result is improvisation and a decline in the quality of engineering and creative solutions, the application of which causes additional damage and complicates the difficult situation in the mining industry, etc.
The final outcome of this process, which in a short time devastated the Serbian economy and its mineral resource complex, was the generation of an environment conducive to colonial predating on our resources.
This prospecting flight over the course of mining from the distant past to the present has been necessary because of the response to the puzzles over the objectives of the business arrangements that are being offered to us today, and which are insufficiently perceived without protecting our mineral resources as real high value capital, without protecting our national interests, our and the future of our descendants.
In regulated, strong, organized and enlightened states with clearly defined property relations, state or mixed but not completely private, mining was the industry of most (strategic) importance to the state, privileged status with precise regulation and rules protecting mineral resources, economic interests, security and sovereignty of the state.
In contrast, in a poorly organized state such as the Kingdom of Yugoslavia with privately owned mines, or in times of war and enslavement, mineral resources are exposed to looting, with visible or disguised indications of slavery as a phenomenon occurring with the transition from traditional to modern society. In medieval Serbia, at that time mining superpower, slavery did not exist. These facts must not be overlooked, they are very important for thinking about today’s entitlements for geological exploration and exploitation of mineral resources.
Today, in a time of liberal ideology that presents itself as something universal and an inevitable consequence of the historical experience of Western society in the era of modernism, the processes that liberalism generates are not accidental, as is the case with the imposition of sanctions, bombing, a transition that has devastated the country economically and prepared for its emergence, business predators on the mineral and other resources of Serbia, which not hijack openly but covertly offer “modern” arrangements for starting businesses.
The rhetoric used to camouflage colonialist intentions convinces us that we do not have the knowledge and material resources for geological exploration, that billions of dollars that we do not possess are needed to open mines, that the probability of success in mining is similar to gambling, that of 500 explorations one mine is opened etc. The meaning of such nonsense has been programmed to calculate the domestic scientific and professional memory and masking the predators’ entrepreneurial intentions for mineral resources.
The merits of domestic wit
It is not said how the documentation from geological funds – collected through decades of geological research into which Serbia (the state and the mining industry) has invested more than $ 1 billion – has come into the hands of predators. It is undesirable to know that the documentation collected in this way serves to navigate not how “expensive geological exploration of millions of dollars is invested”, but rather to navigate possible explorations of known sites.
It is undesirable to hear that Serbian mining and geology in the second half of the last century was raised by the domestic intelligence to the highest technical and technological levels and that the realized production and economic results were measurable by the criteria of the most developed mineral economies in the world. These achievements should be forgotten and erased from memory in order to create conditions for a mist of illusions and a romantic idea of the emergence of “rescuers” interested in investing in geological exploration and exploitation of Serbia’s mineral resources.
Have these kinds of business events happened in the past or are they only happening today? The answer is decisive: nothing happens today that is unknown to mining history, only new players are new with a new entrepreneurial spirit and the skill to perform in a modern sense. The equivalence of today’s events in the mineral resource complex with the events of certain periods in the past is indisputable, and it is undeniable that the outcome of such processes in the past has always been devastating to the economy and national interests.
The rhetoric used to camouflage colonialist intentions convinces us that we do not have the knowledge and material resources for geological exploration, that billions of dollars are not needed to open mines, that the probability of success in mining is similar to gambling, that of 500 explorations one mine is opened etc.
Missing one of the elements of statehood – territory, population, natural resources and government – there is no state. What kind of sovereignty is it when mineral resources belong to foreigners, carrying with them parts of the territory in which mineral resources are exploited. A state whose budget depends on the mercy of foreign “investors” is not capable of managing its resources, hindering the exploitation of mineral resources, devastating the environment, independently enacting legal and normative regulations on geological research and mining, etc. In that case, Serbia would become a regulatory state instead of a developmental state, which in a neoliberal sense means a neo-colonial economic system.
In addition to the targeted destruction of the country’s economic and economic potential, the combined effects of sanctions, bombing, devastating transition and tycoon privatization, which could not bypass the mining economy as part of the country’s economic system, there are numerous mistakes we have made and can make, even under pressure from different sides from the outside, to avoid or at least minimize their negative effect.
The Mineral Resources Management Algorithm is provided by the Mining and Geological Survey Act, which ambitiously integrates all (broad) areas of mining and geology with a highly dispersed problem orientation. In the conglomerate of errors is the positioning of the state administration above the profession, formalization of procedures for the allocation of investigative or exploitation rights on the basis of submitted project documentation – without the possibility of rejecting objects if they are “paperwork” correct, payment method and fees for the exploration area or exploitation field, fees for the use of mineral the raw materials, organization and enforce-ability of inspection control of geological and mining works, etc., are only parts of the legal construction that has allowed the creation of an environment suitable for “modern” arrangements for the initiation of operations in geology and mining. The results of this approach are visible, no comment is needed.
The assumption of a homemade attitude towards the mineral resource complex of Serbia, above all, implies the revitalization of awareness that it is a non-renewable, highly valuable resource of the highest national importance, capital that nature has subverted to us, which must not be left to the element and will of private, especially foreign capital driven solely by profit. Changing the relationship to the mineral resource complex means changing the control and management mechanisms.
Surveillance mechanisms should ensure – complete, stable and reliable state supervision of geological exploration and exploitation of mineral resources, and management mechanisms – professional, timely and efficient actions that should prevent the use of deposits, frauds related to the production and arrival of mines, play out warranty obligations for reclamation and arranging mining operations for degraded landscapes, hiding data and documentation of geological surveys, etc.
Establishing a host relationship to the mineral resource complex is not unknown experimentally and historically, and has always started from the understanding that mineral resources for the country have the highest strategic importance. Given our reality and the limits of the feasibility of ideas, changing the understanding of the functional importance and lack of revenue mechanisms such as concessions, mining rents, fees for exploration and exploitation law, etc., and establishing an effective supervisory-management mechanism by partnership between the state and private capital, the state invests in its business its capital – mineral raw materials, and the investor his funds for geological exploration, start-up and organization of production.
The partnership does not endanger the nature of investors’ financial interests, but it does provide a stable view of the business, provides immediate and effective restraint on the use of beds, inaccurate reporting, concealment of relevant data, environmental devastation, etc. The assumption of the realization of the partnership between the state and private capital implies a fundamental reconstruction of legal and normative regulation, logical and physical topology of the state apparatus in charge of mining and geology.
What Are The Major Natural Resources Of Macedonia?
Iron ore, copper, zinc, etc., are some of the major natural resources of North Macedonia.
Macedonia, officially known as the Republic of North Macedonia, is a landlocked country in Southeast Europe located in the Balkan Peninsula. It is a successor state of Yugoslavia from which it declared independence in 1991 as the Republic of Macedonia. Following a conflict with Greece over the name, Macedonia changed its name to the “Republic of North Macedonia” in February 2019. The country is bordered by Albania, Bulgaria, Serbia, Greece, and Kosovo. With an area of approximately 25,713 square miles, it is the 145th most extensive country in the world. North Macedonia has a population of about 2.1 million inhabitants and a population density of 207.5 persons per square mile. The majority of the population are the ethnic Macedonians while Albanians and Turks also account for a significant majority.
The Natural Resources Of Macedonia
Since independence, the economy of North Macedonia has undergone considerable reforms. The country is considered an open economy with trade accounting for about 90% of the GDP in recent years. The country’s reserve has been boosted by privatization. North Macedonia host several natural resources including precious minerals such as gold, iron ore, silver, copper ore, manganese, and lead. Other major resources include non-metallic minerals, arable land, and agricultural products such as tobacco, grapes, and vegetables. Mining, quarrying, electricity steam, and gas accounted for 15.6% of the country’s GDP in 2014 and the share is expected to increase as many firms (180) are involved in the exploration of the country’s national resources. Below are some of the major natural resources of North Macedonia.
Copper And Gold
Macedonia has one of the longest mining histories in the Balkan Peninsula with active minerals such as copper and gold among other minerals. Copper and gold are some of the oldest minerals in the country and have been used in many ancient cultures. Today, copper is mainly used in construction and as a conductor in electrical equipment. Gold is mainly used in coinage, dentistry, and electronics. Macedonia has several copper and gold mines, the majority of which are still in the exploration stage. According to the USGS, North Macedonia has a total reserve of approximately 79,030 kilograms of gold and 510 million tons of copper. In 2014, the only operating copper mine was the Buchim Mine and was operated by Solway Investment Group Limited of Cypres. The company is also currently exploring the Kadiica Mine. There are also several gold projects in the country including the Ilovica gold-copper project owned by the EUromax Resources. Other gold and copper mining projects under exploration include two exploration concessions being held by reservoir minerals.
Lead And Zinc
Lead and zinc are some of the most important and valuable metallic resources of North Macedonia. The two minerals have been produced in the Sasa Mine which was operated by Solway Investment Group Limited and the Toranica and Zletovo Mines operated by Indo Minerals and Metals. The Zletovo mine is situated in the eastern part of the Kratovo-Zletovo volcanic complex. The deposits found at the mine have been classified as sub-volcanic hydrothermal zinc-lead, composing of pyrite, chalcopyrite, sphalerite, and galena. The reserve at Zletovo mine is estimated to be approximately 13 million tons. Solway Investment Group Limited invested US$ 22 million to prepare and upgrade the mine with facilities and equipment.
North Macedonia is a significant producer of lignite with over 2.5 billion metric tons of lignite reserves. Lignite has been a major resource for electricity production in the country. Coal is mainly explored by AD ELEM in several mines including Brod-Gneotino Mariovo, Suvodol, and Drimkol Mines. The largest coal mines in the country are the Suvodol Mine and Oslomej Mine with a total capacity of 7 million tons per year and are estimated to last approximately 15 years. The Pelagonia basin is currently being explored for possible lignite deposits. The country’s average consumption is 7.6 million tons of which about 95% is used in power generation. With the current level of consumption, Macedonia is expected to start importing coal from 2025 since some of the current mines are quickly running out of coal deposits. Half of the coal imported will likely go into electricity production.
Other Mineral Resources
Apart from the above mineral resources, Macedonia also has abundant metal resources such as iron ore, steel, nickel, and silver. These resources are found in different parts of the country including Zelezara Skopje, Zivojno, and Mariovo, and contribute significantly to the country’s mining sector. However, these minerals occur in small quantities and are currently under exploration. The government of Macedonia is looking to partner with foreign companies intending to make the minerals, especially iron ore, economically viable.
Agriculture plays an important role in the economy of Macedonia. It is the 3rd largest sector and contributes greatly to the country’s export. Crops such as wheat, grapes, tobacco, and vegetables are some of the largest cultivated crops in the country. Wheat farming is concentrated in the south-central region of Macedonia while cereals such as corn and barley are produced throughout the country. Annually, the country produces approximately 378,000 tons of wheat, 142,000 tons of barley, and 200,000 tons of corn. Other important crops produced in the country include tomatoes, sunflower seeds, walnuts, and sugar beets. Macedonia is also a major producer of grapes, producing an average of 32,000 tons every year.
Macedonia’s forestry sector has been neglected for so long, owing to its limited contribution to the GDP. The sector is normally combined with the agricultural sector, making it difficult to measure its contribution to the economy. North Macedonia has one of the largest forest covers in the Balkan, covering approximately 950,594 hectares or 37% of the total land area. By growth, high forests account for less than 30% of the total forest cover while the low forest accounts for 70%. The forests in Macedonia contain about 60 million metric tons of living forest biome. In the last ten years, the average gross volume of timber harvested is 1.03 million cubic meters of which 76% have originated from the state-owned forest and the rest from the private forest. About 75% of the timber harvested is mainly used as fuelwood, especially in industrial processing.
Climate Activists Invade East German Coal Mines in Protest
Climate activists protested at open-pit coal mines in eastern Germany, pouring onto the premises to urge the government to immediately halt the use of coal to produce electricity.
The news agency dpa reported that police estimated more than 2,000 people took part Saturday at sites near Cottbus and Leipzig and that some of the demonstrators scuffled with police. Three officers were reported slightly injured at the Janschwaelde mine near Cottbus. The mine operators, Leag und Mibrag, filed police reports asking for an investigation and possible charges.
Burning coal releases carbon dioxide, the main greenhouse gas blamed by scientists for global warming. The German government plans to end the use of coal by 2038 and spend 40 billion euros ($44 billion) on assistance for the affected mining regions.
How long will Santander continue to profit from Polish coal expansion?
The Spanish bank’s use of ‘ESG loans’ for companies with fossil fuel expansion plans is part of a dangerous new trend
Poland’s fiercely pro-coal Law and Justice (PiS) party may have been returned to power following general election, but already a vigorous coalition comprising local and regional authorities, farmers, NGOs and grassroots groups, business associations and local communities has succeeded in thwarting the new government’s reckless coal ambitions.
Faced with vocal opposition from across the country to PiS’s proposed legislation, which would have allowed Warsaw to open new coal mines around the country without the approval of local authorities, yesterday the head of the Polish parliament threw out reading of the special mining bill during the final day’s session of the old parliament.
Should the government re-table the bill in the coming months of the new parliamentary session, it will only escalate tensions between Poland and the EU over climate policy and land the national authorities in further hot water with Brussels. Environmental lawyers in Poland maintain that the proposed mining law would violate EU law.
As this blog explores, with the Polish state’s gung-ho approach to coal intensifying, for how much longer can financial institutions such as Santander maintain their credibility as supposedly ‘responsible’ banks if they are prepared to continue funding Polish companies which are going all out to prolong and expand their coal fleets?
All in for coal
PiS officials have not been shy about disclosing one of the most pressing reasons for trying to introduce the new radical mining legislation, a highly unusual and controversial move even by the standards of the ‘Coal is King’ mentality so dominant in the right-wing party.
The mining bill was intended to assist development of the planned lignite open-pit mine at Złoczew, which stands to become the country’s deepest ever open-pit mine, would displace over 3,000 people and destroy 33 villages. A concession to open the Złoczew mine is being sought by the state-run energy group PGE to fuel its Bełchatów power plant for the next several decades.
Bełchatów, Europe’s biggest power plant, is notorious for being the continent’s single largest source of carbon emissions.
For PGE, with no coal phase out policy in place, no Paris compliant decarbonisation goals and a 91% coal share of power production (according to the recently updated Global Coal Exit List), steamrolling over public health concerns, people’s houses and completely disregarding the global climate imperative is somehow par for the course. Flying in the face of economic reality to just keep on digging and burning more and more coal would also appear to be part of the PGE business model, according to an analysis published last week by the Institute for Energy Economics and Financial Analysis (IEEFA).
Assessing PGE’s ‘all in for coal strategy’ since 2015 (not the strategy’s actual name, but coal and lignite have accounted for 76% of its €8.5 billion capital expenditure and acquisition investment so far over four years), IEEFA’s view is that the financial performance of the company has been ‘woeful’ and that the current, hugely coal-intensive pathway is financially ‘unsustainable’.
The IEEFA analysis found that PGE’s cost of equity has exceeded return on equity for at least the last four years, and that it has performed poorly when compared with European electric utilities that have tilted towards renewables.
Of PGE’s proposed Złoczew lignite, one of the report’s authors Gerard Wynn reckons, “It’s a distraction which would inevitably create huge losses, ultimately paid by energy consumers or the Polish state. The time has passed for energy companies to replace old coal with new coal.”
Some banks refusing to get out of Polish coal
Steering clear of coal – and companies like PGE still looking to develop new coal projects – has also got to be a top priority for commercial banks. Yet just over a year ago, Spain’s Santander, Italy’s Intesa Sanpaulo and Japan’s MUFG opted to back PGE’s ‘all in for coal’ approach with a loan for the company of close to €1 billion.
Based on the environmental, social and financial risks which PGE’s stubbornly enduring, and potentially legally suspect, coal activities pose, these three banks – all of which recently signed up to the UN’s Principles for Responsible Banking, requiring them to align their business strategies with the Paris Agreement in the next two years – must now be prepared to jettison their recalcitrant Polish coal clients and, indeed, other clients still set on coal expansion.
Seeing no palpable signs of a transition out of coal taking shape in its Polish clients, this is in fact what French bank BNP Paribas announced it is doing at its annual shareholders’ meeting in May this year. Another French bank, Crédit Agricole, has also recently laid down a marker for the banking sector by announcing its commitment to fully phase out of coal, including an immediate end to business with companies planning to develop new coal projects.
However, just as they were signing the Principles for Responsible Banking at a launch ceremony in New York in September, two of PGE’s bankers, Santander and MUFG, signalled that they are prepared to give the Polish coal sector further financial leeway.
The two banks have signed off on a PLN 2 billion (approximately €465 million) ESG-linked revolving credit facility agreement with Energa Group, a majority coal-dependent company involved in trying to construct the last new coal power plant on EU soil – the €1.2 billion, 1000 megawatt Ostrołęka C coal plant.
One of the justifications from Santander for this loan (for ‘revolving credit facility’ read ‘company credit card’) is that the agreement with Energa “prohibits the use of loan proceeds for coal power”.
Energa does have business in renewable energy. Yet, according to an anonymous European banking source talking to Reuters about Polish coal power financing trends, “Banks agree to provide financing for energy groups only on condition that it will be spent on distribution networks or renewables. But this helps the energy companies to find money for the coal projects.”
Energa needs funding generally – to buy back domestic bonds this week, and to pay back €500 million worth of Eurobonds (an issue previously arranged in 2013 by BNP Paribas, Bank of America and HSBC) in March next year. And mounting Ostrołęka C construction costs are looming for Energa. The company has ‘stranded asset risk within a decade’ written all over it, chiefly because of its Ostrołęka C ambitions.
But what of the ESG (Environmental, Social and Governance) criteria attached to this Energa loan, which Santander is trumpeting as a first in Poland?
The extent of the interest payable on the loan will be determined by the bank’s assessment of Energa’s “care for the natural environment, social responsibility and corporate governance”. If Energa continues to pump capital into Ostrołęka C – and that is its plan – then under the ESG terms its interest payments on this loan are likely to rise, and hence Santander will profit further.
The emergence of ESG marked lending by banks for companies with explicit fossil fuel expansion plans is a dangerous new trend. If banks like Santander want to encourage companies – like Energa – which are dead set on firing up new coal plants not to do so, the risk of a couple of interest rate penalty points is not going to cut it, especially where state-owned companies such as Energa (and PGE) are concerned.
Rather than profiting by penalising the likes of Energa with exotic new ‘green’ financial engineering, Santander and others should penalise these companies by not funding them at all. Profiting from climate destruction is never going to be ESG-compliant, as much as the finance industry may want to spin it.