Why Pay Attention to Blue Gem Coal?

30 Aug 2018·Industry Articles & Legislative News

Okay, I know. Most people think of “dirty” coal or the Coal Miner’s Daughter. Understandably so, if those types of coal constitute greater than 95% of all the world’s known coal reserves. Did you know that Blue Gem Coal (and some valuable minerals derived from it) is used to make clean solar panels, cell phones, and other critical technologies and commodities used around the world by consumers and businesses alike? 

Before you jump to conclusions, let me break down the market to show you why Blue Gem coal is … such a gem, and critical for the production of solar panels, and many other electronics.

Backgrounder on Coal Types and Uses 

Decomposing plant matter becomes peat. As heat and pressure increases, it becomes lignite, or “brown coal” and, millions of years later, sub-bituminous coal. These types constitute slightly less than half of the coal reserves globally.  

With additional pressure, heat and time, sub-bituminous turns to bituminous coal, often used (as is sub-bituminous coal) for producing energy (“thermal” coal) and in some industrial applications. It comprises slightly over half of the world’s reserves. 

Fascinating, I know, but stay with me. 

After bituminous comes anthracite, comprising only about 1% of the known reserves globally, and anthracite has different grades. At the top of that grading scale sits the ultra-high-grade coal, or metallurgical-grade coal, that is used in producing a wide variety of end products. We’re nearly to Blue Gem. 

Blue Gem Coal 

An extremely rare substance, this meteorological-grade coal is recognized among industrial users for its very low ash and sulfur contents and extremely high grade. Southeastern Kentucky, near its border with Tennessee, is one of the only known places that Blue Gem coal can be found. While figures are difficult to procure, it represents a small fraction of reserves, within the small subset of metallurgical-grade coal reserves.  

Small as it is, due to Blue Gem’s rare qualities, it is used for applications which the much more abundant reserves of thermal coal or metallurgical coal cannot be used for. Applications in things like solar panels and more.  

What does Blue Gem help produce? 

The primary use of Blue Gem coal is in the production of silicon metals and ferrous metal alloys.  Silicon metals are essential to the manufacturing of computers, medical instruments, solar panels and other high value products.  Ferrous metal alloys are used primarily in the automotive industry, such as aluminum castings.  

What does this mean for an Investor?  

Blue Gem’s value has grown significantly in the last 20 years due to the greatly expanded use of computer and other information technology products which utilize silicon metal, declining reserves globally, and restricted processing capacity due to government regulation.  This makes the pricing dynamics for Blue Gem very different from coals used in the generation of electricity (approximately 40% of U.S. electricity results from coal-fired generation).   Very few coals in the world have characteristics, including low ash, low sulfur, and high concentrations of other trace metals and general hardness, which combine to enable superior quality silicon metal production.  

Blue Gem is one of most highly valued grades of coal in the world (if not the most highly priced), with strong U.S. domestic demand, as well as growing exports to numerous industrialized countries. Due to its rarity and chronic undersupply, Blue Gem coal is priced higher than other types of coal, averaging just under $200/ton.