Sasol has unveiled plans for an initiative known as Project 2050, which is designed to sustain and expand its integrated value chain in South Africa until at least the middle of the century.

Coal and coal-to-liquids (CTL) form an integral part of this long-term plan and key to its success is group company Sasol Mining, which has already gone virtually all the way to secure the required coal reserves to the half century point.

On the coal-mining front, Sasol Mining aims to continue supplying coal to the Sasol Synfuels plant at the constant rate of 40-million tons of coal a year.

“We’re confident that we’ll have the coal reserves to take us to 2050,” Sasol Mining MD Peter Steenkamp tells Mining Weekly in an exclusive interview.

Four new coal mine projects are under way to ensure that Sasol Mining has new, modern replacement operations to replace some of the long-standing, but depleting, mines that have served the company so well for decades.

“It’s a very exciting time for us,” says Steenkamp, as he outlines the progress being made to advance these four coal mine projects, at a capital cost of R14.6-billion.

Sasol Mining is replacing 60% of its coal production through these projects.

The four projects – Thubelisha, Impumelelo, Shondoni and Tweedraai – will replace the long-serving Twistdraai, Brandspruit, Middelbult and part of the Syferfontein operations.

Thubelisha, which is close to completion and in production, will ramp up in the next two years to extend the life of the Twistdraai colliery to beyond 2043.

“Thubelisha is basically complete, within budget and fairly good in terms of its schedule,” says Steenkamp, who joined Sasol Mining as MD in August 2012 and recently celebrated his first anniversary with the pioneering group.

Impumelelo, which will replace Brandspruit, is also fairly well advanced.

Its ventilation shaft is on coal and the sinking phases of the main shaft will soon also be on coal.
Impumelelo, in the Greylingstad area, is 26 km from Secunda and its coal will be transported to the Sasol Synfuels CTL plant on a 26-km-long single-flight conveyor, which will be the longest in Africa when built.

This greenfield project is expected to begin feeding coal to the CTL plant from the end of 2014.

The next two phases of Impumelelo, which extends over a vast area, will extend the mine to its southern boundary, where it is envisaged to eventually also replace a second mine, the Bosjesspruit operation.

Shondoni, a brownfield project, is poised to replace the existing Middelbult mine in 2015.

As large volumes of water have been encountered during the sinking of the Shondoni shafts, considerable cementation has been necessary, which is putting pressure on the schedule. This is not on the critical path.

The far smaller Tweedraai project will replace part of the Syferfontein mine, an opencast operation.

Tweedraai will pass through Syferfontein’s high wall and incorporate the large 93-million-ton Block Four, which Sasol Mining is acquiring from Anglo American Thermal Coal and BHP Billiton and which will eventually have six underground production sections.

Sasol Mining will be required to take a decision on the next replacement mine in 2024, which is likely to involve Impumelelo’s remaining southern phases.

Top Priority

Sasol Mining’s number-one priority under Steenkamp is to provide the correct quality of coal to the synfuels plant at the appropriate cost and in the required volumes.

The 8 000-employee, six-mine Sasol Mining also buys in 5.2-million tons a year from Anglo American Thermal Coal’s Isibonelo colliery.

The offtake agreement with Isibonelo lap-ses in 2026, when the Isibonelo operation will be mined out.

Although Sasol Mining has budgeted to buy-in an additional 350 000 t of coal on the open market this financial year, it has not exercised this option to any great extent at this stage and is doing everything possible to not have to buy more third-party coal this year.

Last year, it was compelled to buy in more than 120 000 t on the open market to sat- isfy a considerable increase in demand from the synfuels plant, but the commissioning of Tweedraai is expected to provide a buffer going forward.

Some of the coal from Thubelisha that was originally earmarked for export was also brought into the synfuels market during the latter part of 2012.

Currently, however, exports continue apace after the large shutdown, which resulted in coal being stockpiled.

Keeping Twistdraai Brand

Sasol Mining will continue to export under the well-known Twistdraai brand, even after Thubelisha replaces the Twistdraai mine.

Sasol Mining has an export allocation of three-million tons of coal a year at the Richards Bay Coal Terminal, although this is rarely fully used.

The mining company’s operating profit in the 2013 financial year was R2.2-billion, 3% down on the previous financial year owing to lower export prices and higher operating costs.

In terms of the overall 2013 financial year results, Sasol Synfuels production was up 4%, operating profit was up 26% excluding once-offs to R40.6-billion and headline earnings a share were up 25% to R52.62 a share, a new record high.

Following the release of strong financial group results for the 12 months to June 30 – which were underpinned by record operating profits from the South African energy cluster – Sasol CEO David Constable said last month that the JSE- and NYSE-listed company’s commitment to the Southern African region remained firm and would not be weakened by its plans to invest in gas-to-liquids (GTL) ventures in the US.

The group’s future local investments could well be larger than the $16-billion to $21-billion being geared up for investment in the US between 2014 and 2020, Constable added.

Sasol has identified the improvement and expansion of its existing asset base in Southern Africa as a key strategic priority, with several projects – collectively clustered under the Project 2050 banner – either under investigation or being implemented.

In 2013, 59% of Sasol’s R32.3-billion capital investment is being directed towards projects in South Africa, which will continue to receive the bulk of the company’s investment in the coming two years, with R42-billion expected to be invested in 2014 and R50-billion in 2015.

GTL Favoured over CTL

Given the availability of low-cost natural gas in the world, GTL is currently favoured over CTL.

GTL is considerably more lucrative under current market conditions and does not require the upfront capital investment of

CTL, where coal first has to be mined and then turned into gas.

GTL is also significantly less carbon intensive than CTL and thus less exposed to the upcoming carbon tax.
Sasol Mining is also keeping abreast of developments in underground coal gasification (UCG).

Should UCG be commercialised at scale, bringing gas in from the coalfields to the plant beyond the gasifiers may be an option, with the cost of coal mining eliminated in the process.

Sasol is firmly in the petrochemicals field and its role in coal mining is defined by its petrochemicals requirements and its belief in the merits of integration and ownership of the entire value chain.

Properly managing the coal quality required for the synfuels plant is regarded as crucial.

More than 90% of the coal mined is ben-eficiated to produce synthetic fuels and a range of chemicals.

At Sasol Mining’s operations in Sasolburg, in the Free State, nearly two-million tons of coal a year are supplied to the group’s Infrachem chemicals production plant from the Mooikraal mine in the Koppies area, the company’s smallest mining operation.

Waterberg Opportunity

A feasibility study of Sasol Mining’s low-cost coal assets, in the Limpopo province’s Waterberg area, which is destined to be South Africa’s next big coal source, is under way.

This study is taking place in conjunction with Sasol Mining’s black economic-empowerment (BEE) partner in the area, the black-controlled, JSE-listed Exxaro Resources, which is already a large producer of coal in the Waterberg, notably at the large opencast Grootegeluk mine, which is South Africa’s lowest-cost coal operation.

Waterberg, where Sasol Mining has a significant coal resource, is regarded as a promising future opportunity and the company has applied to the Department of Mineral Resources (DMR) for a mining right in the Waterberg.

However, the area is water constrained and the rail logistics are not yet in place.

If a rail network is built in the area, which is expected, it might even be feasible for Waterberg coal to be railed to the synfuels factory in Mpumalanga, but firm decisions on how Sasol will use its Waterberg coal are still some way off.

Currently, a fairly small-scale operation is envisaged but there are a lot of possibilities, Steenkamp tells Mining Weekly.

Much will depend on the coal markets in which Sasol Mining opts to participate.

Building a CTL plant in the Waterberg as part of Project Mafutha no longer features in Sasol’s plans.

Carbon Footprint Issues

Sasol has a share in the Technology Centre Mongstad (TCM), in Norway, which tests, verifies and demonstrates technology suitable for the deployment of carbon dioxide (CO2) capture facilities at scale and the further development of carbon capture and storage (CCS) technologies.

Sasol acquired a 2.44% share of the capital and operating costs of the project, with northern hemisphere companies Gassnova, A/S Norske Shell and Statoil also participating.

Through TCM, Sasol has full participation in technology development and in the demonstration of the capture of diluted CO2 streams, with CCS regarded as a significant potential solution to the challenge of eliminating carbon footprint issues.

Sasol is also a member of South Africa’s Centre for Carbon Capture and Storage, which four years ago started working towards the building of an operational CCS demonstration plant in this country by 2020.

Meanwhile, Sasol has set itself carbon reduction targets of 15% at existing CTL operations by 2020 and of 30% at any new CTL operations by 2030.

Depleted Mines

Many of Sasol Mining’s existing mines are more than 30 years old and, as they deplete, their activity is moving increasingly further away from the synfuels plant.

A mining method, referred to as pillar ‘partial robbing’, rather than total pillar extraction, is taking place in the depleted areas of underground mines, which will eventually serve as water-storage facilities.

As Sasol Mining has been a minimal user of the longwall mining method – which results in the collapse of ground at surface level – farmers can generally carry out their agricultural activities uninterrup- tedly on the surfaces above the underground mines, with Sasol Mining catering to their water needs.

Safety Technology

For the first time in its history, Sasol Mining, in the 12 months to June 30, has had a full financial year without a single fatality.

“We are very humbled by the very good safety spell we’ve had,” Steenkamp comments to Mining Weekly.

Intensive training programmes on risk management accompanied the period of safety improvement, as did the introduction of new cutting philosophies and support strategies.

The state-of-the-art continuous miners the company is using have real-time methane monitors and dust-control devices.
Sasol Mining strives to remain at the forefront of technology, which invariably boosts safety.

New equipment comes to a standstill when methane is encountered and proximity-detection technology stops electrically driven moving equipment in its tracks if it moves too close to a personnel.

The recordable injury case rate has declined from 0.7 to 0.58.

Empowerment Progress

The black women-led company Ixia Coal is Sasol Mining’s anchor BEE partner.

This BEE arrangement is further aug- mented by the 26% shareholding of black Sasol Mining employees in the Sasol Inzalo employee share option plan.

Collectively, these two empowerment initiatives elevate the total BEE percentage to 46%.

This broad-based BEE position, held in the listed entity, gives Sasol Mining sufficient BEE credentials to satisfy DMR requirements.

Sasol Mining complies fully with the Mining Charter in all aspects, including in employment equity (EE) and procurement.

Historically disadvantaged South African representation at Sasol Mining, defined according to the Mining Charter’s scorecard for employment equity (EE) for 2012, has relatively high percentages from top man- agement down to junior management.

EE is 53.85% at board level, 40% at senior management level at Secunda, 46% at middle-management level at Secunda and Sasolburg and 55.76% at junior management level at Secunda (see table).