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Developing coal miner could have the answer to SA’s power problem

ANTHRACITE COAL OUTCROP Independent Power South Africa evaluated the anthracite coal from the Colenso project site and determined that it was perfectly suited to a new circulating fluidised bed combustion power station

JOHN JAMES Colenso Power intends to begin coal production at the Colenso project in mid-2015

13th December 2013

By: Ilan Solomons

Creamer Media Staff Writer

  

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With State-owned power utility Eskom declaring an emergency regulatory protocol last month, requiring key industrial users to reduce their energy load by at least 10% as the national grid edges ever closer to overcapacity, South Africa desperately needs additional power sources – a challenge that developing coal miner and independent power producer Colenso Power may be able to rise to.

“We are establishing our own coal mine, which will eventually supply anthracite coal to our 700 MW power station, which will be located near the town of Colenso, on the southern bank of the Tugela river, in KwaZulu-Natal,” Colenso Power chairperson Debbie James tells Mining Weekly.

CEO John James adds that the coal mine and power project will add between 0.05% and 0.1% to the national gross domestic product and will take about 18 months and 36 months respectively to establish and construct.

Debbie James notes, however, that construction of both ventures will take place simultaneously.

John James adds that the company is compiling a fully integrated mine-to-power environmental-impact assessment (EIA) and draft environmental management plan (EMP), which will be submitted in the next 12 months.

He says the company has set mid-2015 as a target to begin coal production at the Colenso project.

Companies investing in Colenso Power’s mine and power project include Chinese professional engineering enterprise Shandong Electric Power Construction Corporation and smaller private equity partners. Colenso Power is also finalising development capital from State-owned development finance institutions.

The Colenso project site has three seams but, to date, geological surveying has only been undertaken on one seamline, as the company is factoring in only one coal seam, which it intends to mine once operational, explains John James.

Project History

The company initially intended to establish an anthracite coal mine in 2005 for export purposes only, owing to anthracite coal not being suitable for Eskom’s coal-fired power stations.

Over the next few years, Colenso Power secured 19 000 ha under various prospecting rights and undertook drilling works. An area of 2 500 ha has been ringfenced to date for the power project. The initial geological surveys reported that the ringfenced area had indicated and inferred reserves of about 40-million tons of anthracite coal resources.

John James says the results of the initial geological survey, undertaken by Colenso Power, were independently verified by independent mining and minerals management adviser Venmyn Deloitte in 2009.

At that time, South Africa was experiencing regular rolling power blackouts, owing to the shortage of capacity on the Eskom grid, and Colenso Power faced a lack of investor interest as a result of the global financial meltdown which had started in September 2008.

In December that year, the company approached power generation firm Independent Power South Africa (Ipsa) to determine if their anthracite coal would be suitable for use in an independent coal-fired power station.

“Ipsa evaluated the anthracite coal from the Colenso project site and determined that it was perfectly suited to a new circulating fluidised-bed combustion power station,” states Debbie James.

In 2009, after researching the legal requirements for the establishment of a privately owned coal-fired power station, the company’s management team decided to pursue the idea.

Colenso Power says the two major challenges normally facing the establishment of a power station – water shortages and a lack of basic infrastructure – do not apply in the case of the Colenso coal-fired power station, as it is equipped with a water intake and effluent outline and also has a rail line and spur attached to the previous Eskom Colenso power station site.

Debbie James points out that the site is about 500 m from the Tugela river, providing it with easy access to water.

The company has been engaging with the local community since 2010 and has received strong support for the project from local municipal and provincial officials and community residents.

Colenso Power approached Eskom about establishing a power station in 2009. Eskom informed Colenso Power that a power station would be well positioned in KwaZulu-Natal owing to the numerous grid lines in the province, and that a power station would play a pivotal role in stabilising the national power grid.

The company approached the Ladysmith municipality, which endorsed the proposals for a coal mine and power station and issued Colenso Power with a municipal resolution in 2011.

“We then approached the National Energy Regulator of South Africa (Nersa) for advice on how best to proceed with the project,” she adds.

Nersa also issued a letter to Colenso Power in 2011, stating it would support the company in its efforts to establish the power station.

Nersa advised Colenso Power to ensure that the company’s EIA and EMP included provisions for a 1 000 MW power station, which Nersa believed could be undertaken once the initial infrastructure for the power station was in place, but which was significantly more than the 350 MW power station envisaged by the company.

Subsequently, the company has met with officials from the Department of Energy, who have “been supportive of the company’s power station development initiative”, says Debbie James.

Conceptual Mining Operations

She tells Mining Weekly that the Colenso project site seams are only 1.2 m thick, which is why the company intends to use the highwall mining method for the coal project, as it is best suited to thin seam lines in this case.

Further, John James explains that the Colenso mine will use an opencast cut method to extract 3.5-million tons at a 5:1 strip ratio, followed by a highwall continuous mining technique to extract a further 20-million tons of anthracite.

He explains that the highwall mining operation will run for 28 km along the outcropping of the coal seam, adding that the operational cost of highwall mining will amount to R80/t and 70% coal, reportable as run-of-mine (RoM).

The contour/bench opencast mining operation is estimated to cost about R30 per strip unit or R150/t at a 5:1 strip ratio.

Additionally, John James says the conventional bord-and-pillar underground mining methods will be used during the latter phases of the mine’s life span.

Colenso Power expects to extract between 70% and 80% of the coal deposits on site.

Debbie James adds that the coal washing costs are estimated to be R30/t RoM, with a 60% washing yield export quality product, while the transport and related costs of getting the coal from the mine to South Africa's private-sector-owned Richards Bay Coal Terminal will cost about R140/t.

“We estimate the at-mine sales price for washed export-quality anthracite to be about R800/t,” she states.

Debbie James highlights the benefits of highwall mining, including the fact that no mining support or transport system is required and ventilation system specifications are kept to a minimal. Further, she says “mining operation costs are negligible, with the total operating cost estimated at $8/t to $10/t”.

“The safety levels are also extremely high, as no one is underground and more work can be undertaken with fewer people. On average, highwall operations require about 35 workers for every 1.2-million tons mined a year, compared with conventional opencast mining operations that require about 140 workers for the same tonnage.”

Anthracite: Clean Coal

According to US-based anthracite coal producer Blaschak Coal Corporation,anthracite coal is more environment-friendly than most fuels, as the low sulphur content in anthracite makes it a cleaner-burning fuel.

“Anthracite produces virtually no smoke or particulate emissions and its full-cycle environmental compatibility is evident, as little waste occurs when it is used. All sizes of the mined coal are used, while the waste created in processing is burned in cogeneration facilities. Further, anthracite’s pure, natural cinders and ash can be used to aerate nursery and greenhouse soil,” states the company.

Community Benefits

Colenso says it plans to include the existing artisanal miners currently mining in and around its coal rights north of the Tugela river as part of the new workforce, once the mine reaches the operational phase.

Colenso Power stresses that it intends to source most of its workers for the coal mine and power station from the surrounding communities.

During construction and the eventual coal production phase, Debbie James estimates that the company will directly employ between 50 and 100 people.

“However, the power station will employ about 3 000 people in the construction phase of the project and about 300 permanent staff once the power station begins operating,” she highlights.

Meanwhile, John James predicts that companies will establish industrial operations in and around the Colenso area as a result of the project’s social and economic development initiatives, which will create many additional job opportunities.

He highlights that, as part of the company’s black economic-empowerment commitment, it will run several community development projects in conjunction with local municipalities, the provincial government and local community leaders.

Power Station Perspective

Debbie James notes that, while Eskom coal-fired power stations do not use anthracite, it is widely used in coal-fired power stations in China and the other Asian countries.

“Anthracite power stations are specialised power stations and mostly employ fluidised-bed combustion or arch-fired supercritical technology,” explains John James.

Colenso Power intends to build the first arch-fired supercritical power station in South Africa a few kilometres from the coal mine.

John James adds that the power station will be developed in two phases over three-and-a-half to five years, depending on government approvals.

He estimates that the first phase will cost about R6-billion and will provide a baseload of 350 MW. This will be followed by the second phase one year later, which will cost about R3-billion, providing an additional 350 MW of baseload capacity for the power station.

“This will bring the total capacity of the power station to 700 MW,” he concludes.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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