With little or no coal mining exploration currently under way in Botswana, the industry has become “moribund”, says mining consultancy Analytika Holdings director Alan Golding.

“While the Botswana coal mining industry has expanded to a current production of about 3.5-million tons a year, the lack of a significant market remains a key challenge,” he tells Mining Weekly, attributing this to infrastructure constraints and basic economics.

“If a product cannot be produced at a price that can be sold on the world market, there is no product,” Golding stresses.

In light of this, he does not believe that Botswana’s coal consumption and production will increase at all this year or in the immediate future, and only expects significant growth to materialise in five to seven years.

“This lack in activity can be attributed to several challenges, such as lengthy transportation routes driving increasing transportation costs that could amount to about $60/t of coal produced, as well as coal washing costs associated with achieving export-quality coal, which cut into the profit margins of possible coal exports,” Golding tells Mining Weekly.

As no profit is currently expected to be gained from mining coal, there is no rush to invest in the sector, he states, noting that current coal prices, which averaged $66/t to $67/t for December 2014, and January 2015 shipments are negatively affecting the coal export market, as well as the ability of exploration companies to bring operations into production.

“Investors are not prepared to invest in exploration if they cannot, in the long term, see a deposit brought in to production,” Golding says, emphasising that if the product cannot be taken to market, it remains only a resource and not a reserve.

Other challenges exacerbating the industry’s struggle include ineffective and slow licensing procedures, which were compounded by the relocation of applications from the Botswana Department of Geological Survey to the Department of Mines, Golding adds.

Further, Botswana’s national strategy to achieve coal exports of about 60-million tons a year would require significant expansion in infrastructure and human resources.

“However, the drive once advocated by government – to establish a Coal Development Unit within the Ministry of Minerals, Energy and Water Resources to oversee and ensure the implementation of a strategic coal monetisation plan and coal value chain improvements, and to coordinate related infrastructure projects – seems to have disappeared,” he points out.

He adds that, since the implementation of the Coal Road Map, only two competitive tenders for prospecting licences have been issued – one of these was in place before the coal road map, while the second tender was not in a highly prospective area.
In addition, applications for licences outside the core area were only considered up to the end of 2012, he says.

Further, with a population of about two-million people, Botswana currently has limited human resources with the required experience and suitable skills for any quantum leap in the mining industry, Golding says.

In addition, there is an apparent lack of a cohesive policy for coal-fired power stations.

For the past three years, it has been indicated that more coal-fired power stations are to be built, with companies having submitted expressions of interest, Golding says, highlighting that no contracts have been awarded yet.

He believes that another challenge is the current finite life of prospecting licences, which is about seven years. He explains that, even when exploration companies find a mineable resource, and the current renewal terms have passed, these companies will become dependent on the goodwill of government for the extension of the licences. “This gives rise to uncertainty about the long-term security of an investment and a reluctance to invest.”

A Gentle Approach
Although a key aim is to encourage the coal mining industry to introduce large coal mines with significant yearly production figures, Golding believes that a more facilitative approach should be considered to develop the country’s coal resources and mitigate any challenges.

“If several smaller mines, with a one-million to two-million yearly production capacity, could be brought to production, it would be easier for the existing infrastructure and rail to cope with international exports and the required capacity,” he suggests.

Moreover, these mines could develop the required human resources and increase the local skills pool, as well as supply the local power generation market, which would allow for coal mining industry expansion. This would also allow for the export of power to neighbouring countries that have shortages, Golding further posits.

“In the long term, Botswana could supply the international or African markets if the price is right,” Golding says.

Citing the South African coal mining industry as a key example, he highlights that the industry should nevertheless be well established before international export is considered and undertaken.

He further notes that value addition, such as coal-to-liquid products, chemicals, such as dimethyl ether, which can be used as a clean high-efficiency compression ignition fuel, and underground coal gasification to enhance and increase economic growth, including providing power generation security, could be explored.

“The value of these products would far exceed the value of raw coal,” Golding says, noting that he is aware of certain companies considering underground coal gasification at certain locations in the country.

“The coal industry has enormous potential and the full resource still has not been realised. Although the country has vast tonnages at depth, which might not be economical to extract using conventional means, it could certainly be turned into smaller-scale industries by this method of production,” he concludes.