Coal is required for the industrialisation of Africa, particularly as several countries on the continent are undergoing significant development and expansion of their industrial sectors, says mining investment advisory company MX Mining Capital Advisors director Dr Mike Seeger.

He states that Africa’s industrial customers requiring increased coal supplies include power plants, cement factories, smelters, tobacco mills, poultry farms, sugar estates and tea plantations.

“Currently, coal mines in sub-Saharan Africa cannot meet the growing demand for the commodity; therefore, Africa’s existing coal mines need to be recapitalised and new mines must be established,” Seeger emphasises.

However, he points out that coal miners are facing “severe challenges” in raising the capital they require, as coal is not viewed as an attractive investment proposition for many traditional investors, owing to the growing number of global initiatives aimed at reducing carbon emissions, such as the United Nations Framework Convention on Climate Change and a general increase in hostility towards the mineral resource being demonstrated by environmental lobbyists and activists.

Seeger further highlights that, owing to the limited conventional funding options available to coal miners – debt and equity financing – for their projects, alternative financing methods are being sought out.

These include sourcing finance from traders through offtake finance agreements; engineering, procurement and construction financing from mining and processing contractors; insurance-backed debt financing from insurers that partner with banks; and equipment finance sourced from mining equipment suppliers for the coal mining projects they supply.

Seeger recommends that companies focus on promoting projects that boast high-grade coal deposits, as these provide for more supply options into multiple industries.

“Simple, structured mining and processing plans need to be executed by experienced mining teams, which should place an emphasis on employing mechanised solutions, where possible, to improve overall project efficiency levels.

Moreover, it is vitally important that coal miners ensure their projects are as environment friendly as possible and that there is a major focus on social sustainability, if they are to attract the investment they require,” he concludes.