Local coal future depends on economic situation

21st September 2018 By: Jessica Oosthuizen - Creamer Media Reporter

Local coal future depends on economic situation

PUT TO GOOD USE South Africa should use its remaining coal resources properly

Coal mining currently provides more than 86 000 jobs locally, and this figure will increase as more junior mines are expected to open in the future, provided that the economic situation “does not deteriorate further”, says coal consulting company XMP Consulting senior coal analyst Xavier Prévost.

South African coal production has remained stagnant during the last five years because of a lack of incentives and capital to implement new coal projects. However, production will soon drop drastically because some of the older, larger mine reserves are almost exhausted, he tells Mining Weekly.

“New reserves are needed to supply coal to Eskom and future independent power producers.”

Further, export coal volumes cannot increase until the local coal oversupply and high prices adjust, he adds.

Prévost explains that inland prices have increased continuously, and some better coal grades have fetched higher prices than similar grades in the seaborne market. He adds that most collieries are now trying to optimise coal production to supply coal to the inland or export markets, depending on the revenue.

“Exports will never recover the allure they used to have. Owing to limited tonnages exported, more low-ash and high-ash coal will be used inland, at higher prices, equivalent to export prices.”

Moreover, there is a growing lack of local coal expertise, owing to many coal and/or mining professionals leaving the country or who became unemployed as the economy contracted, he points out.

Notwithstanding the difficulties currently facing the industry, Prévost comments that, if government legislation – such as the Mineral and Petroleum Resources Development Act (MPRDA) and the Mining Charter – becomes “industry-friendly” again, paired with the existing coal resources available, the industry should be able to turn the current dwindling production rate to a growing one.

He adds that Mineral Resources Minister Gwede Mantashe’s decision to use the current MPRDA is an “applauded first step in that direction”.

Prévost believes that the most significant opportunities for South Africa lie in the country using its remaining coal resources properly by developing resources into new mines. He adds that the country current reserve base of about 30-billion tonnes in situ could last for about 200 years.

Future Suppliers
Prévost comments that, despite the local coal industry, there seems to be a coal revival taking place in most of the other Southern African countries.

“Botswana has large coal resources, but lacks the infrastructure to reach markets. “However, several projects there seem to be near implementation, targeting South Africa as its main buyer, simply because South Africa cannot increase production.”

One such project is coal and energy company Maatla Energy’s Mmamabula coal mine. The mine is in one of the main coalfields in Botswana and contains more than 90-million tonnes of high-grade thermal coal. First coal sales are expected in 2019.

Further, Prévost notes that particularly Zimbabwe’s recent change of government seems to be opening up coal industry opportunities, adding that some of its production could also be aimed at the South African market.

Official results showed last month that Zimbabwe’s ruling ZANU-PF party won most seats in Parliament after sweeping rural constituencies by significant margins, setting the stage for President Emmerson Mnangagwa’s victory.

Mozambique, with a rising coal production, could also become a future South African coal supplier, he concludes.