South Africa has hidden energy in the Waterberg – some 50-billion tons of it.
A quarter of those 50-billion tons could be mined using the opencast mining method, and the remaining three-quarters of it using the underground mining method, depending on the market trends and logistics.
Johannesburg-listed black-controlled coal-mining company Exxaro Resources already has the impressive Grootegeluk coal mine operating in model fashion and supplying coal to Matimba, a model coal-fired power plant.
Last year, Exxaro won another Eskom contract, this time to supply coal to the new large Medupi power station, also in the Waterberg.
Exxaro CEO Sipho Nkosi told the Mining Indaba in Cape Town, in February, that the coal resources of the Waterberg are so abundant that they could host eight large new power stations.
Also eyeing Waterberg’s energy is Sasol, which is keen to build Sasol Four, referred to as Project Mafutha, either in the Free State or in the Waterberg.
Many are betting on Waterberg being the likeliest location for Project Mafutha, not simply because of the abundance of coal feedstock in the area, but also because of the link between Sasol and Exxaro through the empowered Igoda, in which the two companies have shares.
Exxaro wants to become involved in coal-to-liquids (CTL) projects, which is what Project Mafutha is, and Sasol Mining, which manages Igoda, needs a helping hand in the Waterberg, which is a new coal frontier for the coal-to- petrol producer that has mined primarily in the Free State and Mpumalanga.
But the firming up of what are now coal resources into coal reserves is a priority.
According to the strict definition, a mineral reserve is the economically mineable material derived from a measured or indicated mineral resource.
Wood Mackenzie senior coal industry analyst and consultant Xavier Prevost says a resource becomes a reserve once there is a business case to open a mine.
“The development of the Waterberg coalfield will ensure that South Africa does not run out of energy coal any time soon,” says Prevost.
“Some believe that there are 50-billion tons in the Waterberg, but again we have to emphasise that those are resources, as there is no mine plan to attach to that. When and if there is a need for more coal in the Waterberg, then some of those resources might become reserves,” he says.
Although the 1982 De Jager study on coal reserves and resources locates 43% of South African coal in the Waterberg, this is true only if one is talking about resources, and further studies would be necessary to convert those resources into actual reserves, he adds.
The Waterberg will be optimised fully only when coal supply from the current mining areas depletes critically and it becomes imperative to bring the Waterberg more fully into the picture.
The Waterberg’s drawbacks are its distance from the economic heartbeat of the country, inadequate infrastructure and insufficient water.
Power stations and coal mines need a lot of water, which is a scarce commodity in the area.
But, as always, people make a plan.
Prevost believes that the development of the Waterberg will come in three stages. Stage one will be the opening of the new area to supply the new Medupi power station, which will be operational by 2012. Then stages two and three will follow five to ten years later in the form of a second new power-station-linked coal mine.
“The only way that coal will be mined in the Waterberg is the same way that it is being mined by Exxaro at its opencast Grootegeluk mine at present: after mining, the run-of-mine coal needs to be processed to separate the rock from the coal. That is the only way to mine the Waterberg,” he notes.
He points out that the Waterberg’s distance demands good communication links and a railway line considerably more efficient than the existing one.
Development is bound to attract thousands of new inhabitants into the area.
It is estimated that the current plans alone – for the new coal mine and Medupi – will draw an additional 60 000 people into the Waterberg.
Eight such entities would create an entirely new paradigm shift within Limpopo province, which would then be exceedingly well-endowed with available electricity.
That volume of electricity will surely attract other industries to join in the development of the Waterberg and the creation of more jobs.
“Everything needs a business plan. I believe that Transnet Freight Rail is looking at the possibility of enhancing the rail link and, if the population of Lephalale increases, the road infrastructure will be upgraded. Dams will follow,” says Prevost.
Skills will need to be rapidly developed and the so-called further education and training institutions will need to feed new energy and coal-mining personnel into the Limpopo eco-nomy.
While Australia and the US may have advanced technologies, South Africans are specialists in turning structural mining geology to account.
“At the moment, we are exporting our expertise to neighbouring countries like Botswana,” Prevost points out, referring to the extent of South African involvement in CIC Energy of Canada’s development of Botswana’s nearby Mmamabula coalfield.
“I think the situation in the supply of coal for power generation in South Africa is about to receive a big boost. Not only is Eskom a factor in the build-up of new mines, but we are also building new coal export capacity at the Richards Bay Coal Terminal (RBCT),” he points out.
Additional RBCT export capacity is expected to be available next year, when it will become possible to ship up to 91-million tons of coal a year, 19-million more than the current capacity of 72-million tons.
Thereafter, capacity to export more than 100-million tons a year will come under the project microscope.
South Africa’s tried and tested formula is for local coal mines to operate on a twin track, supplying low-quality coal to Eskom for burning in power stations and exporting higher- quality coal into the international market.
Nkosi indicated to the Mining Indaba that Exxaro would be mining coal in the Waterberg for the next 200 years.
Given that horizon, investors are able to go headlong into investing in the area in the knowledge that they will have ample scope to amortise their investments.
An enthusiastic Nkosi, who is also currently the president of the Chamber of Mines of South Africa, invited all and sundry at the Indaba to visit the Medupi site and to take a look at the promising energy-rich Waterberg, which, he said, was already a hive of activity.
He also predicted that the cost of producing electricity in South Africa would remain the word’s lowest because of the availability of coal.
If Exxaro’s plans reach full fruition, coal mined from the Waterberg will in future power South Africa’s new coal-fired baseload power stations, supply larger volumes of product to the local market and the export market as well as energy feedstock for other industries, including benzene, toluene and xylene, and CTL.
In recent years, the development of the Waterberg coalfield has become synonymous with Ernst Venter.
It is said that there is nobody in South Africa who knows the Waterberg coalfield as well as Venter does.
Before becoming Exxaro Coal’s executive GM, in October last year, Venter headed a number of portfolios in Kumba Resources and its predecessor, Iscor Mining
However, his passion has been Grootegeluk, and his vision the development of the Waterberg coalfield.
Venter started his career as an engineer with Iscor Mining, which opened Grootegeluk in 1980. “In those days, nobody else would give the Waterberg a second look, but we knew what we had. Mining the Waterberg coalfield has proved complex, but rewarding,” Venter tells Mining Weekly.
The Waterberg’s 50-billion tons are in 11 zones, which consist of bright coal with interbedded shale and dull coal, sandstone and carbonaceous shale.
To make mining economically viable, all zones need to be mined and the only economi- cally viable way to gain access to all 11 zones is by openpit mining.
However, only a relatively small part of the Waterberg coalfield is shallow enough for access to be gained by openpit mining.
The export of coal earns valuable foreign currency. Moreover, coal-fired power stations generate more than 90% of the country’s electricity.
Venter says that the ability to produce a multiplicity of beneficiated products will determine the success of Exxaro’s future plans in the Waterberg coalfield.
“In fact, the inability to beneficiate run-of-mine production of Waterberg coals actually destroys the potential value of these coals,” he comments.
Exxaro’s Waterberg development programme manager, Jan Oberholzer, believes that, if South Africa looks at the energy potential realistically, it will take some time before the Waterberg’s full offering is optimised, owing to the time needed to remove infrastructural and logistical constraints.
“Since the Mpumalanga coalfields are approaching their peak production and our expectation is that, as from 2015 onwards, there will be an increasing gap in coal supplies from the Mpumalanga coalfields, which will be required to be filled by the Waterberg. It will take 20 to 30 years for the Waterberg to develop its potential,” says Oberholzer.
In order to optimise the Waterberg’s full potential, the country needs to strike a balance between domestic and export supply.
“If one takes a holistic view of the South African coalfields, it is evident that about 50% of South Africa’s remaining extractable coal reserves lie in the Waterberg, which implicitly indicates that it is just a matter of time before the Waterberg is further exploited.
“Exxaro has the expertise to mine the Waterberg coal reserves and has done so since the early 1980s, which proves that sustainable businesses can be developed in the Waterberg. However, owing to current market conditions, especially regarding skills shortages, which is a global issue, projects tend to take longer and are more costly,” he cautions.
Oberholzer adds, “If one looks at the coal supply in the Waterberg, it is not the only pillar in Eskom’s strategy, since there are other enablers such as nuclear and hydro, but that coal will continue to remain a highly significant pillar for the foreseeable future.
“As Exxaro, we have a three-phased approach for the Waterberg. The first phase was to expand the Grootegeluk mine. This included the Grootegeluk Six plant, which produces semi-soft coking coal, and was commissioned in 2006. With regard to power station coal, Exxaro will supply the Medupi power station that Eskom is building next to the mine from a brownfield expansion of the Grootegeluk mine.
“The second phase is to develop a new greenfield mine to supply coal for power generation and to other industries and, for the third phase, we are planning a mega export mine. It is in essence the same plan we had in 2003, but the details evolve as we proceed with our feasibility studies,” says Oberholzer.
Exxaro is also studying downstream activities, which, in themselves, could add to sizable activity in the area. Exxaro is currently constructing a char facility at the Grootegeluk mine that is expected to ramp up to 160 000 t of product a year.
Apart from the mining job creation, a critical mass will develop, which will create the economic environment for the spin-off of secondary industries that support mining and downstream activities.
“That boom is expected to take place in the next five years and it will propel the development of the Lephalale area within the Waterberg,” notes Oberholzer.
Another dimension of the Waterberg develop-ment involves tourism, exemplified by the incorporation of the adjacent Shakama game lodge, which is expected to enhance the offering by including a five-star executive lodge, con- ference facility and spa.
“This provides us with a unique opportunity to spoil our owners and guests with luxurious accommodation, while experiencing the sense of place of Waterberg. Shakama nestles in the valleys facing the core of the Waterberg estate and resonates with our vision of quality,” says development consortium MD Tony Georgiou.
The name Shakama derives from a rare indigenous wild fig tree, many located on the golf courses and nature trails.
Youth will be taught to become guides in the estate and to share their knowledge with the residents and visitors to Waterberg and will provide much needed support in the form of formal employment for an underprivileged community, says Georgiou.
The development consortium will help Limpopo province to profile itself as a major tourist destination, in a win-win situation with the great energy wealth of the Waterberg.