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If you feel coal mining is tough, try determining its costs

If you feel coal mining is tough, try determining its costs


The client in question is one of India’s largest integrated power generation and coal mining organisation. The project has provided reliable and low-cost power for 25 years to more than 42 crore people in seven Indian states. Coal is produced by deploying the latest and most advanced mining technology to exact international operations standards.


The client seeks effective mapping of its coal mining process through efficient implementation of cost accounting processes which produce reliable and accurate results to facilitate prompt and timely decision making.

Understanding the Coal Mining Business Environment:

The coal mining cycle operates through a sequence of stages: exploration, discovery, development, production and reclamation. [1]

If you feel coal mining is tough, try determining its costs

Coal Mining Process:

  • Exploration takes many forms by both prospectors and exploration companies and usually begins with research to select target areas. Once the target areas are chosen, geological mapping and many geochemical and geophysical surveys take place. Even in its simplest form, this activity can lead to coal discoveries. However, exploration activity rarely leads to new coal discoveries.

  • Discovery happens when new coal seams are found. Discoveries rely on good field work, quality geoscience, investment and planning to bring them to the development stage. Permits, leases, and licenses are required at this stage, and the project may be referred for environmental assessment.

  • The coal mine development stage includes feasibility, geoscience and engineering studies. The company’s decision to go ahead with any project depends on whether all of these outcomes are favourable and if all approvals are in place. Finally, the company raises funds to construct and develop a coal mine. This is the most expensive phase of the coal mining cycle.

  • The production phase includes the extraction, milling and processing of coal. The time a mine is in production depends on the amount and quality of the coal in the seam and the profitability of the operations.

  • Coal mine site reclamation and protection of the environment starts at the beginning of a project and continues after closure. Therefore, mines must have closure and reclamation plans.

Methods of Coal Mining

The two basic mining methods are surface (Opencast) and deep underground mining. The choice of mining method depends primarily on depth, density, overburden (OB), and thickness of the coal seam; seams relatively close to the surface, at depths less than approximately 55 m (180 ft), are usually surface mined. Coal seams at depths of 55 to 90 m (180 to 300 ft) are usually deep drilled. [2]

Business Environment in India

In India, the Ministry of Coal must approve the reclamation plan. The Mine owner shall be required to obtain a mine closure certificate from Coal Controller to affect the protective, reclamation, and rehabilitation work. He has to follow the approved mining plan covering final mine closure provisions/ activities for surrendering the reclaimed land to the State Government.

Regarding mining methods, much emphasis is currently given to opencast mining than underground mining because it can recover more of the coal resource (usually up to 100% within the mining excavation), is cheaper, and is safer.

In the case of Opencast mining, the mine waste materials (“overburden”), which consists of soil and rock on the top of the coal seam, must be removed to access the coal and its extraction. This waste removal activity is known as ‘Stripping’. Removal of OB and its placement at a rented premise requires time and cost resources. Also, OB characteristics vary from geography to geography and from different layers of soil (i.e. topsoil and subsoil). The rocky terrain