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Coal sector key to Southern Africa’s economic growth

8th November 2013

By: David Oliveira

Creamer Media Staff Writer

  

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Coal-fired electricity is key to South Africa’s and Southern Africa’s economic growth, which has resulted in increased interest in the country’s and the region’s coal sectors, says SRK Consulting coal team principal geologist Lesley Jeffrey.

“While the sector has slowed down dramatically, owing to the downturn in coal prices, the shortage of electricity in South Africa represents a distinct advantage to the country’s coal industry. Coal-fired electricity generation will have to contribute the greatest share towards alleviating the current shortage, as renewable and nuclear energy is insufficiently developed to meet South Africa’s needs,” she explains.

Jeffrey argues that if shale gas is a viable and acceptable option for electricity generation in South Africa, it will be many years before it will be developed to the point where it can contribute to the national electricity grid. “The conundrum is that the coal industry is not expanding, despite forecasts that the country’s internal market will face severe coal shortages in the future. South Africa is simply not seeing the development of supply to match the need for coal.”

She adds that there are few greenfield coal projects overseen by major South African mining companies, which, she says, is unlikely to change in the near future. “Most activity is as a result of smaller mining companies, many of which are based offshore. New projects are smaller than before, reflecting that no significant new resource blocks are available for development in the traditional coal mining areas. New areas, such as the Waterberg coalfield, in Limpopo, South Africa, require large operations to be deemed economically viable,” she explains.

Jeffrey says this challenges the coal sector, as smaller mining companies often do not have the human or financial resources to develop a large, multimillion-ton operation. Large-scale operations require a great deal of time, effort and money to be invested in the due diligence and feasibility studies that must precede any project, she explains, adding that the depressed coal market has made investors reluctant to commit to projects without exercising stringent due diligence and the relevant studies.

Further, Jeffrey notes that infrastructure developments are key to freeing up bulk commodities such as coal. “An example is the coal mining activities in Mozambique’s Tete province, where coal miners need to transport coal products to ports such as Beira or Nacala. Only large companies, such as Brazilian mining giant Vale can afford to establish their own rail lines,” says Jeffrey.

Similarly, current rail capacity supporting the Waterberg coalfield is insufficient for significant coal exports or even to transport coal to State-owned power utility Eskom’s Mpumalanga-based power stations.

“Botswana’s coal industry is similarly constrained by the lack of infrastructure to move large volumes of coal out of the country. The Trans-Kalahari railway, which is planned to run from eastern Botswana to Walvis Bay in Namibia has been spoken about for many years, but there is still no tangible progress, which has resulted in a static coal industry in Botswana,” explains Jeffrey.

Another challenge impacting on the future of the Southern African coal sector is the availability of water for beneficiation. “The quality of the remaining coal resources in Southern Africa is lower than what has been mined previously and many of the unexploited coalfields are also of a poorer quality,” she says. This means greater portions of run-of-mine coal will need to be beneficiated, which requires large amounts of water.

There are also other environmental and social challenges, such as acid mine drainage, rehabilitation and community participation, impacting on the Southern African coal sector by way of more stringent legislation than in previous decades.

“People are finally beginning to acknowledge that the natural environment and the communities within it have a rightful place on the balance sheet of the nation and that the cost of impacting on the environment and communities around the mine site – and properly mitigating that impact – has been ignored and underestimated for far too long.

“Therefore, the industry has to balance the financial and social benefits of developing a resource with the environmental and social impact associated with it,” concludes Jeffrey.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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