Wollo University Kombolcha Institute of Technology

School of Chemical and Mechanical Engineering

Department of Mechanical Engineering
Stream of Thermal Engineering
Program – Post Graduate

Industrial Project Management and Engineering Economy

‘‘Feasibility study on Wuchale, Totito natural coal mine.’’

By: Esskindir Demeke (SGSR/0337/13)

To: Dr Alie Wube (Asst. Prof.)
Contents
1. Introduction .......................................................................................................................... 2
1.1 Background ........................................................................................................................ 2
2. Economic and Market analysis ............................................................................................... 3
2.1 Resource potentials.............................................................................................................. 3
2.2 Market Demand and Supply ........................................................................................... 4
2.3 Pricing and Plant Capacity.............................................................................................. 5
3. Coal Mining Processes and Technologies................................................................................ 6
3.1 Surface Mining ................................................................................................................... 7
3.2 Methods Adopted in Surface Mining............................................................................... 7
Counter strip mining.............................................................................................................. 7
Area strip mining .................................................................................................................. 8
Open-pit Mining.................................................................................................................... 8
Auger Mining ....................................................................................................................... 8
Coal Processing..................................................................................................................... 9
4. Processing and Production Plant........................................................................................... 10
5. Machineries and Equipment ................................................................................................. 11
6. Construction costs ............................................................................................................... 12
7. Human Resource and training requirements .......................................................................... 12
7.1 Training Requirement .................................................................................................. 13
8. Financial Analysis............................................................................................................... 13
8.1 Underlying Assumptions .............................................................................................. 13
8.2 Finance sources ........................................................................................................... 13
9. Investment .......................................................................................................................... 13
9.1 Production costs........................................................................................................... 14
10. Financial Evaluation ........................................................................................................ 14
10.1Payback period................................................................................................................. 14
10.2Internal Rate of Return...................................................................................................... 14
11. Socio Economic Justification............................................................................................ 15
12. References ...................................................................................................................... 16

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 1. Introduction
1.1 Background
Hard coal mining is a major industry on every continent. In Europe, it is declining; in America
and Australia, it has been successfully functioning for years; and in Asia and Africa, it is in a
phase of dynamic development. Hard coal mining is an important industry for the global
economy's development, owing to the rising energy needs and still-high share of hard coal in
meeting these needs [1].

Principally, mining raw materials is a finite business that reaches its limits once the deposits
mined are depleted or the resources can no longer be mined in an economically profitable way
[2]. Even though coal is dangerous source of energy but it is still the primary source, so
countries are exploring for it since the constant flow of electrical energy forms a basis for a
stable economy.

Coal mining has 3 phases:

1. The exploration phase,

2. The mining phase, and
3. The post-mining phase.

Fig 1. 1 Statistical Review of World Energy

Ethiopia has different hard coal sites which are not touched yet. From these sites one is found
in Amhara region, South-Wollo zone in Ambasal woreda, Wuchale. This site has a very
promising deposit which is not yet explored and studied. The location its self is all inclusive
with good transportation service (since it is near to Dessie and Kombolcha also to Djibouti for
exportation after production), has good water resource.

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 2. Economic and Market analysis
2.1 Resource potentials
There are some sites jotted out with potential capacity of natural coal deposit in Ethiopia, the
most promising of them are Dilbi – Moye – Yayu – Gojeb - Arjo – Nejo in Oromia regional
state Chilga - Mush Valley – Wuchale in Amhara regional state.

The coal deposit in Wuchale can be mined easily and shipped easily too because of the reasons
that the site it self is very near to a metro rail way, and only 90Kms away from the Industry
city Kombolcha. The electricity access and infrastructures are also very good in status, so the
resource is exploitable and have advantages to be taken.

Wuchale is 62 km from Dessie along the Addis Ababa – Mekelle road. The area is found
between 2067 and 3560 m above sea level. The coal-bearing sedimentary succession is
deposited on a basaltic substratum of Ashangi Trap series. The lacustrine coal-bearing
sediments consist of arenaceous, argillaceous, carbonaceous shales, coal seams and oil shale
seams. The coal seams are exposed southwest of the town of Wuchale on the southern flanks
of Titito River [3]. Two lignite seams are interbedded within 25-m-thick coal- bearing
sediments.

The lower seam has a brown black

to black, dull and compacted
nature. The upper coal seam is
black and lustrous. The two coal
seams are separated by a 20– 35-cm
thick grey shale. Palynological
studies revealed the Wuchale coal-
bearing sediments to be of
Palaeocene age. The total reserve is
estimated to be 3.3 Mt [3].

Fig 2.1 coal occurrence and deposit location in Ethiopia [4]

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 Table 2.1. Ultimate analysis of coal deposits of Ethiopia [3]

In contrast to the potential, location accessibility, presence of nearby Totito river, and market
exposure the coal quality is weak ranging from Lignite to Sub-Bituminous. Which totally halts
the exporting possibilities, but the coal can be used for residential and local industrial
applications.

2.2 Market Demand and Supply

Even though, poor quality coal there is in Wuchale the market demand globally is increasing
day to day. As per the forecast of International Energy Agency (IEA), the coal demand is
increasing ascendingly, specially in the Oceanian and greater south east Asia regions.

Fig 2.2. Source, US Energy Information Adminstration, International Energy outlook 2021

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These regions are the major coal consumers recently for the future, in Europe almost coal usage
is phased out, likewise to the US. So, this project will take refence data depending on Indian,
and great South-East Asia market demand.

2.3 Pricing and Plant Capacity

As stated Earliear the Wuchale Totito coal mine has the capacity of 3.3 million tonnes of coal
seeing the demand if it is possible to improve the coal quality, or by reducing the selling value
of the coal relative to its quality, it is possible to export it. Or, if the the total investment cost is
goiing to be good enough, it is better to instal the mining industry there.

Currently the price of coal per Kg is 0.32 USD = 320 USD per tonne as per
http://markets.businessinsider.com, for high quality coals. If it is managable to sell 3 million
tonnes seeing losses. Based on US Energy Informations Adminstration depending on the
grading or coal rank per short ton(2000lb = 907.2Kg), 2020 selling prices are:

• Bituminous = $50.05,
• Sub-Bituminous = $14.43,
• Lignite = $22.16, and
• Anthracite = $98.68.

The coal in Wuchale, Totito ranks between sub-bitimnous and Lignite. So, considering average
selling price by assuming equal existance in percentage of the two coal grade types i.e., ($14.43
+ $22.16)/2 = $18.3.

So, if the plant capacity is ideated to be 3 million tonnes or 6,613,867,865.5lbs = 3,306,933.9

short ton of coal then the total prcie of the plant will be:

• $18.3 * 3,306,933.9 = $60,516,890.4

Roughly the estimated worth of the coal is $60,516,890.4.

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 3. Coal Mining Processes and Technologies
Coal seams can be mined by surface or underground methods, with the choice of mining
method dictated by both technical and economic factors. The most important technical factors
are the thickness of the coal seam, the depth of the coal seam, the inclination of the seam, and
the surface topography.

Fig 3.1 Schematic depiction of the range of different surface and underground types of coal
mining
Surface mining has many advantages compared to underground mining. In general, coal
recovery is very high (85 to 90+ percent), compared to 40 to 70 percent in underground mines.
The productivity of surface mines is generally higher than that of underground mines (Figure
below), and health and safety statistics for surface mining are also generally better than those
of underground mining.

Surface-mined coal from the Powder River Basin is usually simply sized and screened in
preparation for market, whereas underground-mined coal and surface-mined coal from the
Interior and Appalachian basins often requires a greater amount of processing. The cost per ton
of mining coal by surface methods is generally lower than that by underground methods.

The coal deposit type in Wuchale, Totito is outcrop type so surface mining is the suitable one
seeing the geological appearance of the site.

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 3.1 Surface Mining
Surface coal mining generally involves the following sequence of unit operations:
(1) clearing the land of trees and vegetation,
(2) removing and storing the top layers of the unconsolidated soil (topsoil),
(3) drilling the hard strata over the coal seam,
(4) fragmenting or blasting the hard strata with explosives,
(5) removing the blasted material, exposing the coal seam, and cleaning the top of the
coal seam,
(6) fragmenting the coal seam, as required, by drilling and blasting,
(7) loading the loose coal onto haulage conveyances,
(8) transporting the coal from the mine to the plant, and
(9) reclaiming lands affected by the mining activity.
3.2 Methods Adopted in Surface Mining
When the coal seams occur near the surface, it may be economical to extract the coal using
open cut (Also referred to as open cast, open pit, mountaintop removal or strip) mining
methods. Open cast coal mining recovers a greater proportion of the coal deposit than
underground methods. Large open cast mines can cover an area of many square kilometres and
use very large pieces of equipment. Surface mining techniques can be broadly classified into
the following types:
Counter strip mining
Contour strip mining is a method of surface mining or in which bulldozers, power shovels, or
stripping wheels are used to remove large chunks of earth in terraced strips in order to extract
coal from a seam or series of seams on a hill or mountain.
The contour mining method consists of removing overburden from the seam in a pattern
following the contours along a ridge or around the hillside. The process of contour mining
begins with constructing roads to access the coal seam elevation and the top or the mountain.
A bench is excavated in the mountain at the coal seam elevation, allowing for room for the
mining equipment and facilities.
The limitations of this method of mining are both economic and technical. When the burden
undertaken exceeds the coal obtained, the result would be a financial loss. The amount of waste
accumulated after this method of mining is comparatively very high to open pit mining.

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 Area strip mining
Strip mining exposes coal by removing earth above each coal seam. This earth is referred to as
overburden and is removed in long strips. The overburden from the first strip is deposited in an
area outside the planned mining area and referred to as out-of-pit dumping. Overburden from
subsequent strips are deposited in the void left from mining the coal and overburden from the
previous strip. This is referred to as in-pit dumping.
"Strip mining" is the practice of mining a seam of mineral, by first removing a long strip of
overlying soil and rock (the overburden). It is most commonly used to mine coal and lignite
(Brown coal).
Area strip mining, applied where the terrain is flat, commences with a trench or “box cut” made
through the overburden to expose a portion of the coal seam. This trench is extended to the
limits of the property in the strike direction.
After coal removal, a second cut is made parallel to the first one, and the overburden material
from this cut is placed in the void of the first cut. The process is repeated in successive parallel
cuts until the stripping ratio indicates that continued surface mining is uneconomical.
Open-pit Mining
This type of mining involves the extraction of rock or minerals from the earth by forming an
open pit. This process differs from the other method which requires digging into the earth. This
method of mining is carried out where useful minerals or rocks are found near the surface. The
open-pit method is generally practiced where thick coal seams are overlain by thick or thin
overburden; it is also used for mining steeply pitching coal seams.
In open-pit mining of the coal seam, several benches are established in both the overburden
strata and the coal seam. In the beginning stages of mining, considerable volumes of
overburden materials must be accumulated in large dump areas outside the mine.
Auger Mining
Auger mining is a relatively low-cost method of coal mining and is practical in areas where the
overburden (material covering the coal seam) is too thick to be removed economically or where
the coal seam is too thin for underground mining.
Auger mining is a surface mining technique used to recover additional coal from a seam located
behind a highwall produced either by stripping or open-pit mining. Auger mining uses large-
diameter drills mounted on mobile equipment to bore into a coal seam.

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Holes are horizontally drilled at regular intervals to depths of as much as 1,000 feet. As the
cutting head of the auger bites into the coalface, the cut coal is carried out by the screw portion
of the bit.
Once the hole is mined to its required depth, the auger machine is moved a few feet and another
hole is drilled. This mining method is generally inexpensive; however, coal recovery rates are
low. Auger mining is usually associated with contour strip mining.

The site being investigated i.e., Wuchale, Totito is chained mountainous and the coal seams
are thin (0.6m). So, it is better to adopt the Auger surface mining technique since it used for
thin coal seams mining and less expensive.
Coal Processing
“Raw” or “run-of-mine” coal can be processed using physical separation methods to remove
unwanted mineral matter to produce a “clean” coal. Processing adds value in several ways:
• Removal of the mineral matter (or “ash”), which is largely non-combustible
and may constitute up to 65 percent of the raw coal, increases the heating
value of the coal on a mass basis.
• Processing allows greater control over the “quality” of the coal principally
ash and moisture which improves its consistency for end users, such as
electricity generators or coke manufacturers.
• Physical processing to some extent, reduce sulphur and trace element
contents, particularly on a heating value basis. However, generally coal
cleaning is not practiced primarily for this purpose except for the
metallurgical coal market.
The subbituminous coal of the Powder River Basin is almost always shipped to market raw
because it has inherently low ash content and poor “washability’’. The term “washability” is
used to describe the ease with which mineral matter can be separated from the coal, and
depends on the degree of incorporation of the mineral matter in the coal’s organic matrix and
its specific gravity relative to the coal.

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 4. Processing and Production Plant

Fig 3.2 Coal production plant

The extracted coal from the mine site will be conveyed to the Run of mine store which acts as
a ware house for raw coal. Then the coal will be conveyed to the wash plant, after it is washed
then a stock pile of washed coals is formed. After this the washed coal will be conveyed to the
rail loading facility.

Fig 3.3 Coal processing units

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 5. Machineries and Equipment
Table 5.1 cost of machinery and equipment
Machineries and Equipment Quantity Unit Price Total price
1. Horizontal auger drilling rigs, 2 $38,000 $76,000
UG-160A
2. Dump Trucks, XCM-G 10 $60,000 $600,000
XDE240 230ton 240ton
3. Front end loaders 4 $50,000 $200,000
4. Screw conveyors 2 $3,000 $12,000
5. Belt conveyors 2 $58,000 $116,000
Total cost $1,004,000

Suppliers

Horizontal Auger drilling rigs

• Model UG-160
• 100Kw power
• Up to 800mm drilling diameter
• Supplier-Henan Yugong machinery.co, Ltd
• Address China +83 138 3717 8482

Dump trucks

• Model XDE240
• 240 tonnes Capacity
• Supplier-Risen machinery
• China +83 139 1668 9101

Front End Loaders

• Model LW300KN
• 3ton
• Supplier – Xcmg E-Commerce Inc.
• China +86-0516-87739525

Delivery Screw conveyors

• Model XZS-108-3300
• 10tonnes/hr
• Supplier-Xinxiang Zhongchengyou machinery.co, Ltd
• China +86 166 2775 0027

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 Long distance belt conveyors

• Model TD 75 adjustable
• 75tonn/hr
• Supplier-Henan Yugong machinery.co, Ltd
• Address China +83 138 3717 8482

6. Construction costs
The total acre where the plant is to be installed is estimated as 10000m2 . Where the washing,
and run-of mine store covers half of the total area.

The ideated cost for each shade construction including facility and equipment is estimated:
$205,000. Roads taking back and forth between the plant and the mine valued $300,000.

The estimated cost for bureaus, and management offices building is: $200,000.

7. Human Resource and training requirements

Table 7.1 Roughly estimated number of workers.
Jobs No. of workers Monthly Salary (ETB) Annual Salary (ETB)
Drill rigs operators 2 15,000 360,000
Dump Trucks operators 10 10,000 1,200,000
Loader operators 4 10,000 480,000
Plant manager 1 20,000 240,000
Plant supervisor 1 16,000 192,000
Quality supervisor 1 12,000 144,000
Secretary 1 2,500 30,000
Skilled Workers 5 2,500 150,000
Janitors 5 2,500 150,000
Guards 6 2,500 180,000
Service drivers 4 5,000 240,000
Allowances (15%) 504,900
Total 36 3,870,900 = $75,000

From the above estimation the plant will create 36 jobs with a worth of 3.87 million ETB =
$75,000 approximately depending the currency.

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 7.1 Training Requirement
For training some personnel $5000 worth training may be held for proper performance, and
quality production.

8. Financial Analysis
8.1 Underlying Assumptions
Depending on previously imagined data and the assumption to be done now, the financial
analysis is done. For all equipment and machinery equipped there will be 100% production
even in the first year.

8.2 Finance sources

The ideated duration for installing the plants, for fulfilling the legal requirements and for
construction of infrastructures and conveyor passages is 3 years.

The funding is to be covered 20/80 20% from equity, and 80% from loan with 12% interest
and 18% discount rate. If possible, it is recommendable that if the government take care of the
project rather than private equities.

9. Investment
Considering rough estimation for office furniture, and pre-production cost the ideated
estimation of the plant investment is as follows

Table 9.1 The initial investment cost prior to production

Items Cost
Shades, roads, & buildings $1,320,000
Office equipment and furniture $50,000
Plant Machinery and equipment $1,004,000
Transport Services vehicles $200,000
Pre-production cost $50,000
Total $2,624,000

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 9.1 Production costs
Includes utilities, salaries, maintenance costs.
Table 9.2 roughly estimated production costs.
Items Cost
Utilities $30,000
Salaries $75,000
Maintenance cost $10,000
Total $115,000

10.Financial Evaluation
Coal delivering capacity of the horizontal directional drill rigs is 46tonnes/hour. Assume the
following specifications for the plant;

• Working hours per day 8hrs

• Working days per week 5
• Holidays per year 10days
• Summer seasons lagging 10days
• Annual working days 240 days
• As per EIA estimation 1 short ton of lignite and sub-bituminous coals is $18.3.
• Assuming 100% production starting from the 1 st year.
Production per day = 10ton/hr * 8hrs/day * 2 =160tonnes/day =176.4short tonnes/day.
Price per short ton = $18.3
Price of production per day = $18.3 * 176.4 = $3227.6 per day
Annual cash in = $3227.6 * 240 = $774,624
10.1Payback period
$774,624 $774,624 $774,624 $774,624

$2,624,000 $115,000 $115,000 $115,000 $115,000

As we see here the pay back period is the 4th year.
10.2Internal Rate of Return
At NPV = 0, the IRR value will show the profit.
Cash in flow = cash out flow
PVin =PVout

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 1 1 1
[$724,624 × 1
] + [$724,624 × 2
] + [$724,624 × ]
(1 + 𝑖 ) (1 + 𝑖 ) (1 + 𝑖 )3
1
+ [$724,624 × ]
(1 + 𝑖 )4
1 1
= [$115,000 × ] + [$115,000 × ]
(1 + 𝑖 )1 (1 + 𝑖 )2
1 1
+ [$115,000 × 3
] + [$115,000 × ] + $2,624,000
(1 + 𝑖 ) (1 + 𝑖 )4

Multiplying both sides by (1+i)4 , to get:

$609,624(1 + 𝑖)3 + $609,624(1 + 𝑖)2 + $609,624(1 + 𝑖)1 − $2,014,376 = 0

From this equation approximated Value of

The discount rate is almost 5%.

11.Socio Economic Justification

Obviously, the project will bring good currency returns in addition to creating 36 job
opportunities, but the return is not that much satisfying. Beside this coal mining sites are
environmentally unfriendly. The site may displace residents too.

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 12.References
[1] I. J. Kowalska, “Risk management in the hard coal mining industry : Social and environmental
aspects of collieries ’ liquidation,” Resour. Policy, vol. 41, pp. 124–134, 2014, doi:
10.1016/j.resourpol.2014.05.002.
[2] E. Science, “From Mining to Post-Mining : The Sustainable Development Strategy of the
German Hard Coal Mining Industry From Mining to Post-Mining : The Sustainable
Development Strategy of the German Hard Coal Mining Industry”, doi: 10.1088/1755-
1315/50/1/012024.
[3] A. Wolela, “Fossil fuel energy resources of Ethiopia : Coal deposits,” vol. 72, pp. 293–314,
2007, doi: 10.1016/j.coal.2007.02.006.
[4] A. Bedassa, “Ministry of Mines , Petroleum & Natural Gas,” 2016.
www.Wikipedia.com
www.Google.com

http://markets.businessinsider.com,
www.alibaba.com
www.madeinchina.com

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