Botswana-focused coal and energy development company Shumba Energy will continue to benefit from its geographical and market positioning this year and beyond, says Shumba Energy chairperson Alan Mitchell Clegg.
The investment trend in physical and tradeable items, including infrastructure and energy-related commodities – thermal coal, uranium, cobalt and lithium – and the junior mining equities that hold such assets in strategically important areas, show progression, with Shumba Energy continuing to offer shareholders progressive project development.
The principal activity of Shumba Energy and its subsidiaries is the acquisition and development of highly prospective coal exploration licences in Botswana.
Clegg says gross domestic product in all modern and developing countries correlates directly with energy use, as does the life expectancy of mines. Until a reliable, new and reasonably priced baseload source of energy is found, fossil fuels are required. This is particularly the case in Botswana, where coal resource development will remain significant in the next phase of the country’s industrialisation and future sustainable economic growth over the next 50 to 80 years.
“Quickly and drastically reducing the use of fossil fuels by a large percentage, as has been mandated by developed economies and governments, creates a problem for Africa . . . It will have negative effects on the social welfare of many people, in particular the growing energy industry.”
Clegg admits, however, that fossil fuel sources have a limited useful timeframe, and technological advances will ensure that it will not be necessary to rely on fossil fuels by 2200. Nonetheless, he says, this will only impact positively on shareholders and investors in Shumba Energy’s current project pipeline, which will be built and operated to deliver return on investment in an upward price trajectory environment and market well within this period.
However, Clegg stresses the need to develop a well-planned introduction of viable and affordable new energy sources and related storage technologies from an economic, environmental and social perspective. Therefore, during 2017, Shumba Energy extended its business to include the trade of solar energy. It will also actively research other energy fuels, as well as production- and storage-related investments, for potential future diversification and sustainability.
“We need to gradually change our social infrastructure and improve the lives of people and the futures of whole towns, cities and regions, not only because fossil fuels emit carbon dioxide but also to increase efficiencies and introduce more environment- friendly ways of producing, storing and distributing energy.”
The Past Year
Shumba Energy says the past business year ending June 30, 2017, was filled with mixed sentiment in the global mining and energy sector, especially in Latin America and Africa, and was compounded by resource nationalism extremes in some Southern African Development Community (SADC) region countries.
Clegg says regional mineral economy politics, exemplified by resource nationalism, particularly in Tanzania and South Africa, brought negative arbitrage on prospective risk investment in the sector, significantly affecting junior resource development companies.
“Junior mining and energy fuels development markets in the SADC region, where Shumba Energy’s operations are focused, have, however, shown resilience and remain positive for the company, as certain realisations have come into force with Africa’s central policy organisation, the African Union, and its operational body, the African Union Commission for Trade and Industrial Development, regarding sustainable development.”
Shumba’s financial report for the year ending June 30, 2017, states that, generally, the mining and natural resources investment market remained positive, even within the volatile economic and political environment, with precious metals – gold and silver – marching upward on demand for risk hedging against government and public debt levels, US dollar weakness and fear of fiat currency system failure.
Bulk commodities, such as coal, continued to resurge, eventually translating into positive stock market valuations.
Base metals stocks continued to rise on the LME stock depletion, with stronger than expected economic demand and continued significant capital inflows, as well as greatly increased exploration and development activity in infrastructure commodities, energy fuels – uranium in Africa and oil deposits in North America – and energy- storage or battery metals, all contributing.
The financial report stated that bulk commodities, such as thermal coal, and energy fuel markets, where Shumba Energy’s assets and activities are focused, have shown resilience, with the global thermal coal price strength being driven by the new US administration supporting this big sectorial employer, Asian markets continuing to develop because of baseload power demand growth, and China closing heavily polluting mines and power plants.
Additionally, coking coal for reductants in steel and other pyrometallurgical processes remained in high demand at sustainably high price levels during the year under review.
Meanwhile, to meet potential clients and initialise partnerships with companies operational in the coal mining industry, Shumba Energy will attend the 2018 Investing in African Mining Indaba in Cape Town, says Shumba Energy MD Mashale Phumaphi.
The company has been attending the event, which will be held at the Cape Town International Convention Centre from February 5 to 8 this year, since 2007. Phumaphi tells Mining Weekly that the event has grown during this time, with the number of delegates increasing notably, proving that it is a significant event for mining industry stakeholders.