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GMEP a model for future Waterberg development-consultancy

MODEL POTENTIAL The success of the first Grootegeluk mine can be attributed to its supplying coal to State-owned power utility Eskom’s adjacent Matimba power station

XAVIER PRÉVOST Power generation goes hand in hand with mining in the Waterberg region

Photo by Duane Daws

12th December 2014

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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The model applied by mining and metals major Exxaro to its Grootegeluk Medupi Expansion Project (GMEP), in Lephalale, Limpopo, would be the only successful model for additional mining development in the Waterberg region – of which Ecca coal deposits total about 75.7-billion tons of inferred resource, says Pretoria-based coal consultancy XMP Consulting senior analyst Xavier Prévost.

“With the majority of the coal found in this region being thermal coal and, therefore, only suitable for use in a power station, the best means for other mining companies to develop additional mines would be to implement Grootegeluk’s model,” says Prévost.

He stresses that the success of the first Grootegeluk mine can be attributed to its supplying coal to the adjacent Matimba power station, of State-owned power utility Eskom. The existence of the power station creates demand and also significantly reduces transport costs, as the two operations are situated close to one another. According to the Directory of Coal Mines 1990, the mine started production in 1980 and first sale to Matimba was in 1987.

“Power generation goes hand in hand with mining in the Waterberg region,” says Prévost, further pointing out that this also pertains to Mpumalanga’s Central basin, which has several ‘captive’ collieries connected to power stations.

Prévost explains that these types of mines are the most profitable, as they provide a cost-effective means to deliver coal from the mine to the power station.

Distance, therefore, remains a key element for mining development in the Waterberg, he says, noting that, while State-owned logistics company Transnet plans to establish a larger and efficient coal line from the Waterberg region to the Central basin to transport coal to power stations, the significant distance and transportation costs of moving low-quality, high-ash coal to a specific destination “will kill the value and profitability of the coal”.

Creating Market Availability
Owing to abundant thermal coal resources in the Waterberg, there is potential for additional mining development, including the planned development of Exxaro’s Thabametsi mine, in conjunction with a possible independent power station, as well as the development of the Limpopo West coal block, owned by petrochemicals major Sasol and Exxaro. However, the availability of a market remains a key challenge.

“The coal produced has to remain in the Waterberg to be sold and used,” Prévost reiterates, noting that the current lack of a market is exacerbated by government’s and the National Energy Regulator of South Africa’s policies to promote nuclear and renewable-energy power generation, rather than coal-fired power generation.

Prévost told Mining Weekly in September that revisions to South Africa’s Integrated Energy Plan and the Integrated Resource Plan, which delineate the country’s energy mix to 2030, could impact negatively on the industry if government decides to reduce coal use for power generation by up to 60%.

This is evident in the current lack of incentive and capital to implement new coal projects, with production remaining static.

Moreover, the full potential of the Waterberg coalfields cannot be realised until the area’s infrastructure is suitably upgraded, says Prévost, noting that other factors limiting growth include the dangers of spontaneous coal combustion, as coal is stockpiled for extensive periods, as well as regional water availability.

“Water remains one of the biggest determinants for growth in the Waterberg, as a specific amount is required to support the growing population in Lephalale, the surrounding mining operations – including coal washing – and the power station operations,” Prévost points out.

He notes that, while there are plans in the pipeline to develop additional reservoirs, the majority of the water is reserved for the Grootegeluk mine and the Medupi power station. “Any amount of additional water would be a blessing and, if the region were able to access more water, the possibility exists for more mines.”

Prévost further notes that, owing to lower-quality coal in the other Waterberg blocks, significant tonnages – similar to those of Exxaro’s future near 70-million-ton-a-year production rate – need to be produced to ensure feasible and economic mining.

Nevertheless, completion of the GMEP will enable Eskom to generate much-needed electricity for South Africa, to expand the coal mining industry in the Waterberg region, and to stimulate job creation, says Prévost, further noting that the Limpopo province will benefit most from this, as it is one of South Africa’s more impoverished provinces.

“Moreover, Grootegeluk and the GMEP will only be the first step,” he adds. Prévost believes that Exxaro’s Thabametsi mine and mines owned and operated by other coal mining companies, such as Anglo American Thermal Coal and Sasol Coal, could significantly assist the economy and industry and, in turn, the power generation industry, if they were to implement Exxaro’s strategic model.

However, Prévost points out that the GMEP and the Grootegeluk mine will only be as sustainable as coal-fired power generation in South Africa.

“The best way for Southern Africa’s developing countries, including South Africa, to survive and to increase industrialisation, would be to burn more coal for power generation, owing to the abundant resources of low-grade coal on the subcontinent,” he concludes.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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