JOHANNESBURG (miningweekly.com) – The black-controlled JSE-listed coal-miner Exxaro was considering sizing a new coal mine to support a power plant of the magnitude of "another Medupi", Exxaro Coal executive GM Mxolisi Mgojo said on Tuesday.

Mgojo said that it was possible that Exxaro would make its reserves available for the supply of coal to four independent power producers (IPPs) that had put in bids to South Africa's State-owned electricity utility Eskom.

He said that Exxaro had taken a strategic decision to support IPPs that were given the go-ahead to establish independent power stations in the Waterberg, in addition to looking at all the coal supply opportunities being provided by Eskom.

Exxaro, which increased its operating profit by 71% to R2,5-billion in the 12-month period ended December 31, and reported a 36% increase in revenue to R13,8-billion, said at its presentation of results that it would, from 2011, begin supplying the first of 14,6-million tons of coal a year to Eskom's new Medupi power station under construction in the Limpopo province.

Given the vast coal resources that Exxaro had in the Waterberg coalfield, Mgojo said that it made sense to continue to look to the area for future energy requirements, which was why the company had announced the new Grootegeluk West coal mine.

The size of the proposed new mine would depend on the size of the power stations that might be built.

"I don't know how many IPPs will be successful, but the four that we are looking at supporting will probably be about 1 000 MW each. We are looking at gearing ourselves to probably creating another Medupi," he said

Exxaro CEO Sipho Nkosi told Mining Weekly Online that Exxaro was in discussion with a number of South African and European IPPs that had submitted bids to Eskom to generate IPP electricity in South Africa.

Nkosi said that, while there was a need for Eskom to continue to play a key energy role, it was important for the country to start looking at other entities such as IPPs.

"We need to have a partner and that's the important component. But, yes, we are looking at that business very seriously, and we have submitted a bid on that," Nkosi said.

Both Exxaro and South Africa had huge coal reserves and Nkosi's view was that, over time and with government encouragement, it would be important for Exxaro to itself move downstream into power generation.

"In a way, we are already in energy because we are producing coal which is used to produce power in South Africa. It's all about one step at a time," he said.

Exxaro reported that power station coal production at its Eskom-tied mines was significantly higher in 2008, owing to a turnaround at Arnot mine.

Of the 44,8-million tons of coal that Exxaro produced in 2008, 36,7-million tons was used for power generation.

The company said that it was expecting to increase its production of steam coal by 1,5-million tons in line with strong demand for local power station coal.

The company's Mafube joint venture coal mine had ramped up fully, the new Inyanda coal mine was producing above nameplate capacity of 1,8-million tons and the new Diepspruit reserves at New Clydesdale Colliery were being assessed.

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