North American Gem is setting its sights on becoming a major coal mining presence in Kentucky. The path to that door leads through a rare type of coal that is used in the production of silicon chips and solar panels, as Keith Regan learns.
Its name may suggest high-end jewelry, but North American Gem is actually a company striving to become a major coal producer, with a unique approach that focuses on reclaiming past-producing mines and searching for and mining a rare type of coal that isn’t destined to be burned for steam production.
After some early exploration efforts focused on coal in the Saskatchewan province of Canada, the Vancouver-based company has begun acquiring and restarting coal mines in Kentucky, targeting those with seams of Blue Gem Coal. Blue Gem is used in industrial production processes, including the production of silicon chips and materials found in solar panels. It's a grade of coal that possesses certain elemental characteristics that make it uniquely suitable for production of silicon metals and is in high demand, says Jeff Desjardins, marketing manager at North American Gem.
“Demand for Blue Gem Coal is up 15 percent in 2011 and is estimated to increase another 13 percent in 2011,” Desjardins says. “We expect this trend to continue as the production of silicon chips for computers and other devices continues to increase.”
Because of its scarcity—the overall market for Blue Gem is about 3 million tons per year—Blue Gem garners a premium price as well, typically selling for as much as 200 percent more per ton than even the highest grade of steam coal, providing the margins the company needs to recoup its investment in its mines.
Blue Gem Coal can be processed to have low enough ash levels at the hardness required by silicon metals manufacturers. This type of coal is only mined in Kentucky and parts of neighboring Tennessee, West Virginia, and parts of Colombia in South America.
That approach—and the fact that the company has disavowed the mountaintop-removal approach to coal mining that has fallen out of favor with regulators—has helped the company turn mining and environmental agencies into cooperative partners.
As it mines the Blue Gem, the company will also encounter seams of Jellico coal in its mines. That high-grade steam coal will be mined and sold, most often locally. “One of the benefits of mining in Kentucky,” says Desjardins, “is that there is an extensive network of end users that need coal, so there are many different coal buyers within a short drive from our processing facility.”
Moreover, because Blue Gem Coal is used in industrial production and not burned, and because sustainable power production equipment such as solar panels are among the end products of the Blue Gem, the coal is seen as much more green-friendly than traditional steam coal production. “Coal has gotten a reputation as an environmentally unfriendly type of industry. But this coal is used for green power; it’s very much the opposite of that.”
Among the factors creating the opportunities for North American Gem is the Surface Mining and Reclamation Act of 1977, a federal law that particularly impacted Kentucky and laid out strict rules for reclaiming mine sites. The result is a slew of older mine sites that are sitting idle but with new technology can be cleaned up and brought back into active production, Desjardins notes. While permitting new mine operations can present a multitude of regulatory hurdles to clear, North American Gem is working with regulators to reclaim older mines that have been sitting unremediated from earlier production efforts.
“There’s a lot of coal left on sites that were mined and closed down before 1977. These were areas where the operators took advantage of easily accessible coal with little regard to restoration of the land to its original condition. We’re using new augering technology and other methods that enable us to get into a lot of spots where producers could not before,” Desjardins says.
To date, North American Gem has developed three active mine operations in Kentucky. The first was intended to be a trial of its approach. Located in Whitley County and known as Demp's Hollow, it came online in November 2009, was mined for 9 months and is now in reclamation. “It was meant to be a learning process for us,” Desjardins says.
A second mine, in Knox County, is now in active mining after permits were obtained in the summer of 2010. Known as Gilliam Hill North, the mine is expected to ramp up production as process kinks are worked out. The mine is expected to produce up to 10,000 tons monthly at peak production.
The third mine, the largest being worked on so far, is known as Swan Pond and is expected to be up and running by the end of 2010, once permitting issues and final details on roadway layouts and other items are finalized.
Lying in wait is a project that the company is particularly excited about because it’s the first it will attack that contains only Blue Gem coal. Known as Granny Rose, that mine is expected to come online in the spring of 2011, shortly after all permits are in place.
Bringing the mines back into production has been the task of a North American Gem team as well as key third-party suppliers and partners. Most of the mining operations, for instance, are being handled by Kentucky Mining Partners, which is responsible for mining as well as for on-site safety and environmental compliance.
The in-house team moving the projects forward includes general manager Dean Schafer with the help of engineering consultant Deborah Moses, as well as other mining experts. The company gained significant expertise and on-the-ground credibility recently in Kentucky when it added William J. Grable to its board of advisors. Grable is the former commissioner of the Kentucky Department for Surface Mining Reclamation and Enforcement, under Governor Wilkinson of Kentucky, and an architect of the state’s long-term energy plan and mining safety standards. “He worked in the industry for 35 years and oversaw the department that regulates coal mining permits,” Desjardins says. “Having him on our team has been a huge boost to us.”
North American Gem is committed to not engaging in the mountaintop-removal style of mining, a process that has been decried by environmental groups and is being clamped down on by both state regulators and the regional office of the Environmental Protection Agency (EPA). “They’re really clamping down on mountaintop removals and valley fills, and all our projects are contour mining projects. We don’t have to deal with that whole issue.”
Future opportunities to repeat the reopening-reclamation process will abound, with many small mines scattered around the hills of Kentucky and neighboring states, many owned by private landowners and many in economically depressed areas where mining activity is a welcome boost. “Even those mines that have been in operation have been cash-strapped, and operations are not as optimal as they could be,” Desjardins says. “We’re able to go in and find opportunities where we can acquire properties by negotiating leases that are mutually beneficial to both North American Gem and the landowners. In Kentucky, relationships with private landowners are very important. Once a company proves itself to be a solid, reliable partner to do business with, it makes it easier to find and complete other deals down the road.”
“Our goal is to be a large mining company,” Desjardins concludes. “We’re looking at operating up to 10 mines in total, but that’s just the beginning. We want to go further than that. In all, we’re looking at 10 to 20 years of mining and becoming a big player in the Blue Gem Coal market.” www.northamericangem.com
