HardAssetsInvestor

Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Today we’re going to be talking about one of America’s most abundant resources: coal. And my guest is George Jarkesy Jr., who’s the director of America West Resources. George, thanks very much for coming on the program.

It’s often been said that the United States is like the Saudi Arabia of coal. As I said, it’s one of our most abundant resources. And now I guess coming back into the picture in a very important way, as our demands for energy remain strong, tell us a little bit, you’re in the coal business, how does the outlook for coal look to you?

George Jarkesy Jr., director, America West Resources (Jarkesy): Well, the outlook for coal is very bullish. People don’t think about it on a global level, because America typically hasn’t exported much coal. And I would go so far as to say America is not only the Saudi of coal, they’re the OPEC of coal. America has a third of the coal reserves of the world’s coal reserves that are proven minable reserves.

So with America having a third of the reserves, as coal comes under more demand internationally, you see pricing in coal over the next five to 10 years increasing substantially.

Norman: Now, has the coal market for a long period of time in the United States kind of, not languished, but fallen behind other energy sources, natural gas for example being one of them, right?

Jarkesy: Well, two things have happened in the last 50 years of coal. Coal was mostly used for coking, when America was big into steel. Then coal fell off, and it became mostly power production. Now you’re seeing both coming up, where coke and coal are being used for steel and power production because steel demand around the world is good. Still over 50 percent of America’s power is from coal.

Norman: Over 50 percent?

Jarkesy: Over 50 percent of America’s power is still generated from coal. But, from the early ’80s till now, they haven’t built coal-fired power plants. They’ve only built natural gas peaking plants. Although coal only costs a third of what natural gas does to produce power — America has not been building coal-fired power plants.

Norman: But that’s because of the opposition, the environmental, greenhouse gases. I mean, are those attitudes changing here? From what I sense from you, they’re not really changing here, but it’s the external demand, the other countries in the world who might not care so much about that aspect, but they need the electricity production.

Jarkesy: That’s right. And whether America expands its coal uses or not doesn’t really have an effect on the market domestically. What’s driving today, and will be driving coal prices for the next decade is what’s going on in the international market. You have one coal-fired power plant opening a week between China and India; one power plant a week opening up.

Eighty percent of China’s power is from coal. Now, 10 years ago, China used less coal than America does, which is today about 900 million tons, around a billion tons. Today China is using 3 billion tons a year of coal.