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25th March 2019

Better Returns on a Bond Than a Bank
An asset-backed bond’s value is linked to the price of an asset such as gold, oil or coal, and most bonds have a fixed value determined at the time of purchase.

An asset-backed bond’s value is linked to the price of an asset such as gold, oil or coal. Most bonds have a fixed value determined at the time of purchase. This value is a combination of the bond’s face value and its interest rate, both of which are set at the time of issue.

Bonds can yield higher returns than bank savings accounts; however, they are riskier. Bonds and savings accounts are both viable investment options. However, with savings accounts, there is no option of selling to another investor. Bonds, on the other hand, can be offloaded, the most crucial question here however is, do you get better returns on a bond than a bank?

In this article, we will focus on asset-backed or commodity backed bonds and savings accounts. What are the fundamental differences between asset-backed bonds and savings accounts?

Is Your Money Safe?

With a basic savings account, there is no chance of losing your money. You can keep your money in the bank for as long as you want, and access it whenever you need to. However, when it comes to bank shares, is your money safe? A clear example of a banking crisis that affected thousands of shareholders was the 2008 RBS £45 billion government bailout in the UK.

Royal Bank of Scotland otherwise known as RBS was rescued from collapse by a massive taxpayer-funded government bailout in 2008 leaving thousands of shareholders out of pocket. RBS paid their first dividends to shareholders in 2018, ten years after the controversial government bailout.

In 2018, the bank which is 62% government owned paid a 2p dividend to more than 190,000 shareholders. Public dismay surrounding the RBS bailout directly impacted public perception of high street banks in the UK, with more than 2,900 high street bank closures in the past three years, the British public are losing faith in traditional banking.

Natwest closed more than 600 branches between 2015 and 2018, followed closely by HSBC which closed more than 400 high street branches.

Asset-backed bonds cannot be instantly accessed. However, investors can sell their bonds to other investors to obtain their funds. The most beneficial option when dealing with bonds is to leave them to mature for at least three to five years. In terms of risk, there is more risk associated with investing in bonds, but the yields are indeed higher than parking your money in a savings account.

Asset-backed bonds are certainly not risk-free, the most significant example of high-level failure for asset-backed bondholders was the infamous Enron scandal. Highly publicized in 2001, the American Energy corporation Enron famously collapsed leaving over 20,000 creditors and bondholders out of pocket by more than $67 billion, leaving the energy corporation bankrupt.

Most basic savings accounts typically offer between 1% and 3% annual return on your money. Some banks in the UK, for example, provide higher returns on your initial deposit; however, the rates often drop after the first year. For example, Nationwide offers 5% on £2,500 fixed for 12 months; thereafter the rate drops to 1%. Bank returns are reliable and are suitable for low-risk investors.

The return on a bond is potentially higher than a bank. Nevertheless, there is more risk associated with investing in bonds. Investors who are willing to take the risk will undoubtedly reap the long term benefits. Some asset-backed bonds offer fixed returns ranging from 7% to 13.5%. New Coal Solutions, for example, provides a fixed annual yield of 12%.

Deciding where to park your money is a significant decision. Bank accounts are generally the safer option, but for avid wealth creators, bonds will provide more significant long term returns.

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4th March 2019

Why Coal Produced by NCS Is Better Than Traditional Coal
Coal is one of the most significant fossil fuels, known as “black gold”; it is a potent caustobiolith.

Coal is one of the most significant fossil fuels, known as “black gold”; it is a potent caustobiolith. (solid mineral fuel) Despite its significance, traditional coal production is highly detrimental to the environment. Producing toxic waste, poisonous gases, and solid waste matter. According to the World Health Organization, atmospheric pollution caused by coal production shortens more than 100,000 lives annually in North America.

Is there a better way? A more energy efficient cleaner way of producing powerful solid fuel similar to coal? New Coal Solutions utilise state of the art technology to provide energy efficient synthetic coal, is it better than traditional coal? If so, why?

Environmental Impact of Traditional Coal Production

There are currently an estimated 30 billion tons of solid waste (coal fines) worldwide, and a further one billion tonnes are produced each year. Waste matter contains poisonous heavy metals such as mercury, uranium, and arsenic.

Fly ash left behind from the burning of coal is often stored in impoundment ponds, the U.S EPA officially classifies these areas as potential human hazards.

Coal fines penetrate the water table, seep into the soil, and release toxic gases into the atmosphere. Water contamination is perilous for aquatic wildlife, sediment pollution caused by poisonous chemicals increase in potency over time, causing long-term damage to land animals and aquatic species.

Recycling Coal Fines

New Coal Solutions utilise ever-increasing waste from coal production to produce a highly efficient coal alternative. A high-quality synthetic lump coal which is greener, more energy efficient and more cost-effective than traditional coal.

Why Recycle Coal Waste?

More than 1 billion tonnes of coal fines are discarded annually; New Coal Solutions efficiently utilise advanced technology to turn coal waste products into energy while minimising environmental impact.

The value of artificial lump coal is about 10% less than traditional coal. However, it is 20% more energy efficient, making it an eco-friendly, viable alternative to conventional lump coal.

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14th February 2019

The Pros and Cons of Asset-Backed Bonds
An asset-backed bond also referred to as a commodity backed bond is a debt security that is linked to the price of the asset.

An asset-backed bond also referred to as a commodity backed bond is a debt security that is linked to the price of the asset. The interest rate paid on the bond changes as the price of the asset increases and decreases. The value of the bond can also increase or decrease according to the cost of the commodity.

Asset-backed bonds are issued for more than five years; they are recognised as long term company liabilities. Some companies do offer two or three-year insured bonds as an alternative to the long term commodity backed bonds provided by most companies.

Asset-backed bonds are issued by the company or organisation that produces the asset. For example, coal, oil or gold producers typically issue asset-backed bonds.

Investment is risky; there are advantages and disadvantages to investing in asset-backed bonds. Here are some of the pros and cons associated with this type of investment.

Pros

Investment Returns Are Fixed

When you invest in asset-backed bonds, you receive a fixed rate of interest; your interest will be returned to you when the bond matures. With this type of investment, although risky, you know exactly how much your returns will be. For example, coal technology company New Coal Solutions offers 12% per annum as a fixed return with bonds starting from £10,000.

Not As Risky As Stocks

Bonds are not as risky as stock because if a company is liquidised, bondholders often get paid before shareholders. Asset-backed bonds are not tied to the market like stocks and shares are.

We only need to cast our minds back to the 2008 financial crisis; shareholders were hit hard with Northern Rock being the most memorable example. The collapse of the fifth largest mortgage lender left over 190,000 shareholders out of pocket. With minimal shareholder protection, shareholders are still fighting for compensation after the British Labour government nationalised the bank in a bid to save it from sinking after the subprime mortgage crisis hit the British lending industry.

Less Unpredictable

An asset-backed bond’s value can increase and decrease over time; however, they are typically more stable than stocks and shares. A clear example of the volatility of shares is Bradford and Bingley bank. They also suffered significantly in the 2008 credit crunch. In September 2008 the company’s share price dropped to a record low, a government rescue plan left thousands of shareholders with unanswered questions.

Clear Ratings

Bonds have a universal rating system; credit rating agencies typically rate them; this facilitates the investment process and provides investors with more assurance when deciding which bond to purchase.

The Cons

Fixed Returns

Fixed returns can also be considered a disadvantage because investors might miss out on significant potential gains.

More Funds Needed

Typically, investing in commodity-backed bonds requires more money. There are some lower investment options; however, for higher returns, you would generally need to spend more. £10,000 is a good place to start when considering an asset-backed bond investment.

Interest Rate Risk

Interest rates directly impact bond value, especially for investors who do not wish to hold on to their bonds to maturity.

Less Liquid

Bonds issued by large corporations are often highly liquid; however, bonds issued by small to medium companies are generally less liquid. Also, bonds that have a high face value are usually less liquid as the scope for potential investors is lower.

When smaller corporations collapse, the chances of bondholders receiving interest payments is slim. Although bondholders often get paid before shareholders, the implosion of a company could also spell doom for asset-backed bondholders. A recent example is the failed Scottish energy company Our Power. In 2017, the Scottish energy firm issued a three-year mini-bond offering 6.5% per year. These bonds are asset-backed bonds; however, as they are mini-bonds, they are not protected by the Financial Services Compensation Scheme. Therefore, there is currently no guarantee that the bondholders, who are now unsecured creditors will get their money back. Although there is risk associated with investing in asset-backed bonds, often a larger company will strike a deal with the failing corporation to purchase the bonds. Thus providing more security for asset-backed bondholders.

There are risks associated with all types of investment. Asset-backed bonds are good hedges for inflation because most asset-backed bonds can be expected to increase in value over time. Asset-backed bonds are suitable for investors who are interested in fixed returns.

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14th January 2019

Rare Earth Elements Support Renewable Energy Technologies
Sustainability and coal mining don't typically go hand in hand, but a project at the University of Kentucky is offering an opportunity to bring the two together.

Sustainability and coal mining don't typically go hand in hand, but a project at the University of Kentucky is offering an opportunity to bring the two together.

At least that is the hope of Jack Groppo and Jim Hower, research professors at the UK Center for Applied Energy Research (CAER), where they are locating and evaluating rare earth elements (REEs) found in coal and processing coal byproducts.

REEs are a series of 17 elements within the Earth's crust. Due to their unique chemical properties, REEs are essential components of technologies spanning a range of applications, including smartphones, batteries and defense technologies.

They are also used in renewable energy technologies, like wind turbines and solar panels.

“Never in a million years saw that coming, but it's true. It is absolutely true,” said Groppo, who is also a professor in the UK Department of Mining Engineering. “That's where the rare earth elements are (in coal) and they need those for renewable technologies. So once again, we see that the coal is the tangible compatible partner, not only in the load distribution for generation as a fuel resource, but actually providing the raw materials to generate the technology in the first place.”

With funding from the U.S. Department of Energy, U.S. Department of Defense and National Science Foundation, the team at CAER is working with university and industry partners to retrieve these valuable chemicals from fly ash, the residual material left over after burning coal. CAER has been conducting research with fly ash since the mid-1990s, repurposing it into construction products like fast-setting concrete.

“If you can go after the REEs as a byproduct of going after something else, that makes sense. And, that's sustainable,” Groppo said. “You extract the REEs from fly ash, give the fly ash back to us, and we will use it to make concrete. So there's no waste from this process if we do this right.”

China currently produces the majority of the world's REE supply, and scientists and policymakers agree the U.S. needs to find a domestic source. According to Hower, the premier domestic source is the Fire Clay coal seam in Eastern Kentucky. This fact gives Kentucky and UK even more of an opportunity to lead this endeavor.

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13th January 2019

PLN Plans to Acquire More Coal Mines
PLN is planning to ensure long-term supplies for its coal-fired power plants by acquiring two coal mining sites in Kalimantan and Sumatra during mid-year.

PLN is planning to ensure long-term supplies for its coal-fired power plants by acquiring two coal mining sites in Kalimantan and Sumatra during mid-year.

“Currently, we are still examining the two coal mines. Hopefully, the acquisition would be done by mid-year,” PLN president director Sofyan Basir said as quoted by kontan.co.id.

He declined to mention the names of the owners and the production capacity of the mines on both islands.

The acquisition of the mines is vital to the sole electricity off-taker in the country, which is struggling to ease its financial burdens amid rebounding coal prices, among other issues. In the long run, PLN will only need to calculate coal production costs as it will no longer be affected by uncertain global commodity prices.

This year, Sofyan said, PLN set a target to secure 100 million tons of coal, a slight increase from its target last year of 94 million tons.

He said the acquisition would help the company guarantee its coal supply. “By acquiring them, we hope at least 30 percent of our total coal supply would be sourced from our mines, while the rest would be from private miners,” Sofyan added.

The government seeks to generate 35 gigawatts this year as it aims to increase the electrification ratio to 99 percent in the archipelago.

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5th January 2019

South Africa: Eskom Says Coal Stocks Have Improved
South African power utility Eskom says coal stocks have improved at a number of its power stations, as it carried out maintenance over the festive season.

South African power utility Eskom says coal stocks have improved at a number of its power stations, as it carried out maintenance over the festive season.

However, the risk of rolling blackouts remains as the country’s power grid is still constrained.

“Eskom continues to have coal shortages, but there is an improvement in terms of where they are,” Eskom spokesperson Khulu Phasiwe, told fin24 on Thursday.

Further, he said the improvement of coal stocks was part of the reason there was no load shedding over the festive period.

In an interview with eNCA, the utility’s CEO Phakamani Hadebe said more power outages might be implemented in early January.

“As we work on the maintenance we hope the situation will be better, but after the 15th [of January] probably there might be stage one load shedding that might take place,” he said.

Stage one power outages can cut up to 1000MW from the national grid.

Last year, Eskom implemented nationwide power outages following reports that it had difficulties completing maintenance work at a number of its power plants on time.

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3rd January 2019

Government Nod Awaited for Oman’s Clean Coal Power Project
Oman’s first-ever clean coal-based Independent Power Project at Duqm is awaiting the final clearance from the government before the procurement process can progress, a media report quoted a top official as saying.

Oman’s first-ever clean coal-based Independent Power Project at Duqm is awaiting the final clearance from the government before the procurement process can progress, a media report quoted a top official as saying.

Oman Power & Water Procurement Company (OPWP), part of Nama Group, is overseeing the procurement process linked to the development of a proposed 1,200 MW plant based on clean coal technologies at the Special Economic Zone (SEZ) in Duqm, reported Oman Observer.

A prequalification process initiated last May elicited responses from a number of international developers signalling their interest in participating in the competitive tender for an award to build the landmark project.

“The procurement process is still going on and we are ready to issue our Request for Proposals (RfP) for the coal project,” said Brian Wood, Planning & Economics director —OPWP. “But we are waiting for final government approval for the project,” Wood told the Observer.

“This plant will meet the most current international standards for environmental quality and emissions control,” said OPWP in its 7-year Outlook Statement covering the 2018 -2024 timeframe. “It is expected to reduce gas needs of the electricity sector by 4-5 million standard cu m per day, enabling the Ministry of Oil and Gas to supply new industrial projects.”

According to the state-run power procurer, the proposed Duqm Clean Coal IPP is expected to provide 600 MW of capacity by 2024, rising to 1,200 MW at full power in 2025, subject to “timely approvals”.

“The plant will provide essential power supply to the developing Duqm industrial hub, and export surplus capacity to the Main Interconnected System (MIS). In 2024, considering expected Duqm demand of about 110 MW, the contribution to MIS demand may be about 490 MW. This estimate of exports to the MIS may be revised depending on the pace of Duqm demand growth,” it said.

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19th December 2018

South Africa Regulators Approve Canyon’s Acquisition of Kangra Coal
Canyon Resources (Canyon) has completed the US$40 million purchase of Kangra Coal after South Africa’s regulatory authorities – approved the deal.

Canyon Resources (Canyon) has completed the US$40 million purchase of Kangra Coal after South Africa’s regulatory authorities – the Competition Commission and the Department of Mineral Resources – approved the deal.

Canyon bought Kangra from Madrid-listed energy firm Gas Natural Fenosa (which held 70%) and South African company Izimbiwa Coal Investments (which owned 30%). Kangra’s coal assets are located in Mpumalanga and KwaZulu-Natal. On 11 December 2018, the Department of Mineral Resources gave consent to the transfer of mineral rights from the Madrid-listed energy firm to Canyon. The Competition Commission had granted approval of the transaction on 27 November 2018.

The purchase agreement was signed on 25 June 2018. Kangra has an underground mine and opencast operations in Saul Mkhizeville near Piet Retief (Mpumalanga). It produces 2 million tpy of coal. It also has a 2.3% interest in Richards Bay Coal Terminal which allows it to export about 1. 6 million tpy. In total, Kangra employs 1282 people including contractors. The conclusion of the deal has added to the growing portfolio of coal assets under the control of Menar, the mining investment company that also has an interest in Canyon.

In November, Canyon hosted a ceremony to officially open Khanye, the latest project to be converted into a full mining operation with a processing plant on site, in Bronkhorstspruit (Gauteng). Menar is also a controlling shareholder in Zululand Anthracite Colliery which was purchased from Rio Tinto in 2016 and turned into a profitable business within two years. Menar’s Managing Director Vuslat Bayoglu said he was excited that the deal was concluded to the satisfaction of all parties including regulators who processed it reasonably quickly.

Bayoglu said: “This for me is a sign that South Africa is a good investment destination. Investors are always looking for host countries that can process transactions – both simple and complicated ones – with reasonable speed. It’s a competitive advantage we must not take for granted.”

Bayoglu and his team of experts at Canyon are already conceptualising plans to develop new projects in Kangra and potentially create more jobs.

He said: “When Menar acquired ZAC, we retained jobs and over time created more. We are looking at ways to grow Kangra. I don’t believe in sitting on assets. Mineral Resources Minister Gwede Mantashe says we should develop our assets and grow mining’s contribution to the GDP and I agree with him.”

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