This is part of a program whose objective is to establish a high efficiency prototype industrial power system that can burn coal directly. The power system consists of a slow-speed, two-stroke diesel engine and a fuel preparation system which provides clean micronized coal in a water slurry for use as the primary fuel. The project is divided into five tasks. This topical report deals with the subject of Task 2: Fuel Preparation, Beneficiation and Handling. The first part of the report consists of a comparative evaluation of the beneficiation technologies that can reduce the ash content in the coal to less than 1%, and a comparative analysis of the most important factors affecting the economics of these processes as a whole. The second part is a report of the slurry procurement effort and the preliminary screening tests that were performed on the slurries to determine which ones will be used for the diesel engine tests scheduled to commence in July 1984 in a single-cylinder test engine facility located at the Sulzer Bros. Ltd., plant in Winterthur, Switzerland.