CAPE TOWN (miningweekly.com) – Coal is the main producer of revenue in South Africa, generating R100-billion a year by 2013, but the industry is facing serious challenges, including an urgent need for investment in collieries.

“We need more mines but for that, we need more investment," said senior coal analyst for XMP Coal Consulting Xavier Prevost.

He told the Investing in African Mining Indaba, in Cape Town, that potential investors were on tenterhooks pending the revision of mining legislation.

“Investors are waiting and holding their investments until the new law comes into operation. They’re worried that they will be prevented from getting enough profits from coal mines.”

Prevost said government’s warning that it may implement a new carbon tax in 2015, which would penalise the producers of carbon dioxide, could also be another burden on the industry and could detract investors.

Threats of labour unrest as well as plans to ultimately drop coal as the largest producer of energy were also a worry.

Investment was particularly needed in rail to transport coal to Richards Bay, while infrastructure was sorely needed at the Waterberg coalfield.

On the exports side, the industry had done well, with a record 70-million tons of coal exported last year. Three-quarters of coal exports headed for Asia last year, while the amount of coal sold to Europe in December was larger than usual.

“It looks like the European market is coming back to us. But we’ll have to see how long this will last.”

Further, shale gas production, particularly in the US, had affected worldwide coal prices and markets.

“One of the reasons coal prices are so low at the moment is because we’re suffering the pressure of a large amount of American coal flooding the market…This is because of the impact of shale gas in the US market,” said Prevost.